Power ministry seeks coal cess waiver for FGD power plants

The power ministry has sought the waiver of Rs 400 GST compensation cess on coal supplied to thermal power projects that implement emission control equipment to offset the increase in power tariff to end consumers due to implementation of emission control equipment as per the directions of the environment ministry.

The Clean Energy Cess was started in 2010 to promote clean energy technologies but later subsumed in GST compensation. With the introduction of the Goods and Service Tax (GST) in July 2017, the Clean Energy Cess was abolished and a new cess on coal production at Rs 400 per tonne, called the GST Compensation Cess, is being levied.

“The power ministry has proposed to the ministry of finance that they might consider exempting the cess on the power plants that are in compliance with the FGD (Flue-gas desulfurisation) norms. If FGD norms are complied, the power cost will go up by 35 paisa. FGD should not be penalising power companies, distribution companies or the consumers,” a senior government official said.

Power regulator Central Electricity Regulatory Commission (CERC) had earlier allowed recovery of cost on emission control equipment from electricity charges over the life of the project. In April last year, CERC, in an order in the case of Reliance Power’s Sasan Power Ltd, approved provisional capital costs related to installation of FGD systems.

The power ministry has in its recent letter to the finance ministry proposed that waiver of coal cess can be provided to power plants from the date of commissioning of FGD equipment starting July next year, the official said.

“The move will increase competitiveness of projects and also comfort lenders in financing the equipment,” he said.

In April the environment ministry extended timelines for complying with emission norms by coal-based power plants by three to five years, and fixed penalties for non-compliance as against the earlier mandate of closure. Under the previous timeline, all coal-based power plants were to comply by December 2022 or face closure.

All thermal power plants have now been categorised into three groups—category A are plants within the 10 kilometre radius of the National Capital region and cities with a million plus population; category B plants are in the 10 kilometre radius of critically polluted areas or non-attainment cities; the remaining power plants are category C.

Power plants in category A can install the emission control equipment by December 31, 2022. As per the previous timeline, power plants in NCR were required to be in compliance by December 2019. The units in category B have till December 31, 2023 to comply and those in category C till December 31, 2024.