Coal cess fund yet to light up clean energy projects

The effort of the Centre to financially support clean energy initiatives by imposing a cess on coal producers seems to have failed. 

The cess pool has collected Rs 54,000 crore since 2011-12 but only half has been transferred to the National Clean Energy Fund (NCEF), and barely Rs 9,000 crore has been used to “finance clean energy projects”. NCEF was renamed Clean Environment Fund in last year’s Budget.

A major share of the NCEF fund went as “budgetary allocation” to the Ministry of New and Renewable Energy (MNRE). The amount of Budget grant to the MNRE was Rs 1,977 crore in 2014-15; Rs 4,000 crore in 2015-16 and Rs 4,947 crore in 2016-17 — 98 per cent of the MNRE’s budget — indicated data compiled by the finance ministry, which was reviewed by Business Standard.

The disbursed amount included projects from other ministries — Namame Gange, Climate Change Action Plan and conservation of ecosystem, wildlife habitats, conservation of tigers & elephants and such. The cess was originally proposed for clean energy but its ambit was enhanced for environment conservation in the Budget last year.

However, the Ministry of Water Resources, River Development & Ganga Rejuvenation and the Ministry of Environment & Forests received Rs 1,000 crore and Rs 247 crore, respectively, from the fund in 2015-16. The Ministry of Drinking Water & Sanitation received Rs 110 crore in 2012-13 and in 2015-16.

The secretary of MNRE could not be reached for comment. Government officials, however, pointed out at the long pending list of projects awaiting disbursal from the NCEF grant. An inter-ministerial group had recommended 55 projects costing Rs 34,811 crore for NCEF grants in six years. The amount allocated is Rs 17,468 crore.

Among the major clean energy projects to be funded by the NCEF are Rs 5,000 crore each as viability gap funding for grid-connected solar projects and rooftop solar projects, and Rs 4,000 core for green corridors project — alternative transmission network for renewable energy — being built by state-owned Power Grid Corporation of India.

Coal cess was announced in the 2011-12 Budget as a levy of Rs 50 a tonne on domestically produced and imported coal, lignite and pite production. In its maiden Budget in July 2014, the NDA government increased the levy to Rs 100 a tonne. It was made Rs 200 in 2015 and Rs 400 in the Budget of 2016-17. 

As the increase in price of coal comes under the change of law regulation of the Electricity Act and Tariff Policy, any change in price is reflected in the final power tariff. According to industry calculations, this amounts to a change of 12-15 paisa per unit in the final rate, which is borne by the consumer.

“In most cases, distribution companies do not pass through the enhanced power tariff to ensure the rates remain populist,” said an independent power sector expert. “This impacts their financials. On the one side, there are distribution reforms and on the other, coal-based power is becoming costlier to facilitate renewable energy. But as data indicate, no considerable clean energy projects are being funded.” The Indian power industry consumes close to 500 million tonnes of coal annually. With the doubling of cess, close to 800 billion units of electricity was impacted by the increased price of coal.

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