India

IN-8:Clean Energy Cess

Policy Description

In February 2010, India announced the introduction of a clean energy cess in its Budget 2010-11 to reduce the negative environmental consequences and increased pollution levels associated with industrialization and urbanization. The clean energy cess is levied on coal, lignite and peat at a rate of INR 50 per tonne. It is applicable to imported coal as well. 

Description

 

In February 2010, India announced the introduction of a clean energy cess in its Budget 2010-11 to reduce the negative environmental consequences and increased pollution levels associated with industrialization and urbanization [1]. The clean energy cess is levied on coal, lignite and peat at a rate of INR 50 per tonne. It is applicable to imported coal as well. The cess came into effect on July 1, 2010 following the enactment of the Finance Bill [2]. The first payment from registered producers was due on September 5, 2010. According to the Rules, every coal producer must be registered with the jurisdictional central excise authority and the cess must be paid on a self-assessment basis.

As a means to channel funding for clean energy projects in the country, the Budget 2010-11 also announced the establishment of the National Clean Energy Fund (NCEF). An Inter-Ministerial Group (IMG) was established to approve projects/schemes that would receive financing through this fund.

Projects that use innovative methods to adopt to clean energy technology and research & development and meet the following criteria and may be eligible for funding through the NCEF:

(a) Sponsored by a Ministry/Department of the Government; and

(b) Submitted by individual/ consortium of organizations in the government/public sector/private sector in the form of loan or viability gap funding, as the IMG deems fit on case to case basis.

Eligible projects include those developing clean fossil energy, renewable/alternative energy, energy infrastructure projects, replacing older energy technology with more efficient ones [4].   Financing through the NCEF for a particular project is not to exceed 40% of the total cost of the project. The IMG is to design a standard format for submission and evaluation of projects to receive proposals from various ministries of Government of India.

As of June 2013, the NCEF had a total of INR 8200 crore of which about 45% of the financing had been allocated to projects [5]. By 2015, the Fund should have an amount equivalent to INR 10000 crores [6].
 

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic

Position in the Pyramid

About Us

Participation: Mandatory

Period

Start Date: 2010

Agencies Responsible

Bureau of Energy Efficiency (BEE)

Primary Objective: GHG Emissions

Objective

To reduce the negative environmental consequences and increased pollution levels associated with industrialization and urbanization

Target Group

Coal, peat and lignite industry

Driver of energy consumption or emissions affected by policy: Emissions

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

Coal, peat and lignite producers in India and includes imports as well

Quantitative Target? no

Progress Monitored? no

Verification Required? no

Verification Done By

Organisation Type Organisation Name
Government Agency Ministry of Finance

Enforced? yes

Sanctions: Penalty of INR 10,000

Requirements on the Target Group

 

A producer of coal, lignite and peat must be registered with the jurisdictional central excise authority.

The cess is payable on quantity removed during a month on self-assessment basis. Adjustments for payments are permissible by the next payment date.

Every producer is required to maintain records showing the quantity of specified goods actually removed during a month, the amount of cess payable during a month and the total amount of cess paid.

Support by Government

N/A

Implementation Toolbox

Complexity of Implementation

Government

Government needs to collect the cess and revenues generated through this mechanism needs to be allocated appropriately. Allocation of funding through the NCEF is complicated since the amounts are large and identifying appropriate projects requires levels of approval by the IMG.

Target Group

Producers need to only maintain a monthly record of amount of coal removed and the cess paid.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions Not available
Estimated costs/benefits for industry N/A N/A
Estimated cost for government

References & Footnotes

References

[1] Press Information Bureau, Government of India (2010). Proactive Steps in Budget 2010-11 for the Environment. Available at http://pib.nic.in/newsite/erelease.aspx?relid=58419

[2] http://www.cbec.gov.in/excise/cx-circulars/cx-circulars-10/circ-cec01-2k10.htm

[3] Press Information Bureau, Government of India (2011).Creation of National Clean Energy Fund. Available at http://pib.nic.in/newsite/erelease.aspx?relid=71517

[4] Ministry of Finance (2011). Guidelines for appraisal and approval of projects/schemes eligible for financing under the National Clean Energy Fund. Available at http://finmin.nic.in/the_ministry/dept_expenditure/plan_finance2/Guidelines_proj_NCEF.pdf

[5] Down to Earth (2013). Crores to Gamble. Available at http://www.downtoearth.org.in/content/crores-gamble

[6] Daily News (2013). Clean energy fund underutilised, lacks of focus: Experts. Available at http://india.nydailynews.com/business/94d13a489798b29eaf49c6ebb00871fd/clean-energy-fund-underutilised-lacks-of-focus-experts