So, let's talk green: The gutsy coal tax raises a question

Come April and in India, it is time to talk money. With the closing of the financial year at the end of March, budgets, allocations of funds, taxation and national fiscal issues are conversations that fill news channels and discussions in newspapers. It is particular interest to us too, as watching what the government is doing to mitigate and adapt to climate change issues is of great importance. Is the Government of India walking the talk or not?

300 million people of India do not have electricity at all, and another 300 million or do not get it when they need it. Electricity is the back bone of industrial development, and improved quality of life of the people of a country. India is dependent on coal as the source of electricity, where 75% of its electricity is generated using coal fired plants. This also leads to massive emissions of carbon di oxide which is a is a major greenhouse gas that is contributing to global warming, which leads to devastating extreme climate events.

Considering this, it takes a progressive mind set, commitment and political guts to impose, increase and survive a tax on coal, and that is what the Government of India has done – impose a massive coal tax.

It takes guts because we have seen causalities of carbon tax on coal. Australia introduced a carbon tax in July 2012 of A$23 per tonne of carbon. Less than 12 months, Julia Gillard, the first and only woman prime minister of Australia lost her job, and had to resign. There was an intense, and well planned backlash against this carbon tax, which was seen as an unnecessary burden on industry, increasing energy costs, hurting Australia’s competitiveness and leading to inflation. By July 2014, the Senate had repealed the Australian carbon tax.

Contrast this to India where in 2010, the country introduced a coal tax of Rs. 50 per tonne of coal that is mined or imported into the country. This was progressively increased over the years and today stands at Rs. 400 per tonne. As of March 31 st this year, the accumulated coal tax collection is now projected to be around Rs54,336 crore (over US$ 8 Billion)! Importantly, the government that has been increasing the tax is still around, and thriving, unlike what happened in Australia. Granted, that this is not such a huge political hot potato in India, where other issues occupy the minds of the electorate. Having come thus far, this is a huge achievement for a country as large as India.

All this money was meant to fund and promote clean energy, through the National Clean Energy Fund (NCEF). India has an ambitious target of 175 gigawatts (GW) of solar, wind and other renewable energy by 2022. The money needed to achieve these targets are huge, and the country needs to look beyond just budgetary allocations from the NCEF. For example, it is estimated that solar, alone, would require $100 billion in debt to reach 100 GW.

The Ministry of Finance has allocated Rs 12,430 crore (US$1.8 billion) from the NCEF to the Ministry of New & Renewable Energy between 2010-11 and 2016-17. Other areas where the coal cess revenue has been utilized are for water resources and river development, drinking and water sanitation, and environment and forests. These sectors have collectively received Rs 5,039 crore (US$750 million) over the last seven years.

There is one question though, that seems to point towards misuse of the fund that has been collected. Why has only 40% of the collected fund been transferred to the National Clean Energy Fund. With a huge target of 100 gigawatts of operational solar power capacity by March 2022, it is strange as to why more funds are not being diverted towards renewable energy projects.

As citizens, we appreciate the progressive stand of the government. But when you have the money on hand, why isn’t all of it allocated towards the NECF? Mr. Minster, are you listening?