Minister Javadekar’s Coal Tax Claim True, But Less Than 20% Has Gone Into Clean Energy & Environment Projects


Mumbai: “We have put carbon tax on coal production at the rate of $6 per tonne,” Union Minister for Environment, Forest and Climate Change Prakash Javadekar, said on December 10, 2019, while delivering India’s statement at the 25th session of the Conference of Parties under the United Nations Framework Convention on Climate Change in Madrid, Spain.

Javadekar’s statement is true, but less than a fifth of the money collected has been used to finance clean energy and environment projects as was intended, our analysis of government data shows.

Though the cess was envisaged to fund “research and innovative projects in clean energy technologies”, funds accrued were spent on general environmental projects, we found, and in some cases, to reduce the Centre’s deficit and to compensate state governments after the Goods and Services Tax (GST), experts said.

Coal cess began at Rs 50 per tonne in 2010, rising to Rs 100 per tonne in 2014-15, and further to Rs 200 in March 2015, before reaching Rs 400 in March 2016, government data show. When rounded to the nearest dollar, the tax set at Rs 400 ($5.6) per tonne of coal produced and imported amounts to $6. In July 2017, the coal cess was subsumed under the Goods and Services Tax (GST).

The tax was first introduced by the United Progressive Alliance government in the 2010-11 budget, as a Clean Energy Cess which created the National Clean Energy Fund (NCEF), supporting research and development of clean technologies, said Vibhuti Garg, senior energy specialist at the International Institute for Sustainable Development (IISD), an independent think-tank.

However, in 2015, the NCEF became the National Clean Energy and Environment Fund (NCEEF), broadening its scope to not just clean energy, but also a clean environment, explained Chirag Gajjar, senior manager and lead for mitigation at the World Resources Institute India (WRI India), a global research organisation.

Of the Rs 29,645 crore transferred to NCEEF, Rs 24,614.49 crore was allocated to four ministries, government data cited above show.

From this allocation, 69% went to the Ministry of New and Renewable Energy, including the Green Energy Corridor, Jawaharlal Nehru National Solar Mission (JNNSM) and Solar Photovoltaic (SPV) technology Power Plants. The remaining 31% went to a variety of other environmental projects such as installation of SPV water pumping systems, National Mission for Clean Ganga, and National Mission for Green India.

Up until 2017-18, less than a fifth of the Rs 86,440 crore ($12 billion) generated from the tax has gone towards clean energy investments, data show.

In addition, much of the money originally transferred to the NCEEF did not end up being put towards energy or environmental projects at all, and was unaccounted for, Garg said.

For example, about 79% of money transferred to NCEEF was not spent on projects in 2011-12, and 83% in 2012-13, as described by the Ministry of Finance’s report of the National Clean Energy Fund.

Source: National Clean Energy & Environment Fund brief 2017-18 data

Between 2010-11 and 2017-18, the portion that did not reach NCEEF was used to reduce the deficit of the central government’s accounts, said Garg.

Since 2017-18, 100% of the tax has been used by the Centre to compensate state governments’ revenue shortfall following introduction of GST, explained Apurba Mitra, policy lead for climate and energy at WRI India.

Does the cess still help?

The tax does increase the financial incentive to use clean energy in India by increasing the cost of producing coal compared to clean energy, said Gajjar.

“Clean energy has been growing even without the fund, which was inefficient,” he added. “India is now at 82 GW, more than halfway to target of 175 GW by 2022 that was announced in 2014. Such progress has prompted [the] more optimistic target of 400 GW for 2030, announced by Narendra Modi at the United Nations Secretary-General's Climate Action Summit 2019 in New York.”

However, to reach 400GW, not just coal tax but investment in clean energy will be needed, Garg said. 

At the moment, 75% of India’s electricity generation still relies on coal, and only 10% comes from renewables, Garg said. “For renewables to become the base source of energy, we will need a lot more funding into better renewable technologies such as storage batteries and grid balancing. This was the purpose that this tax revenue was supposed to fulfil.”

(Habershon, a graduate from the University of Manchester, is an intern with IndiaSpend and FactChecker.in.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

Mumbai: “We have put carbon tax on coal production at the rate of $6 per tonne,” Union Minister for Environment, Forest and Climate Change Prakash Javadekar, said on December 10, 2019, while delivering India’s statement at the 25th session of the Conference of Parties under the United Nations Framework Convention on Climate Change in Madrid, Spain.

Javadekar’s statement is true, but less than a fifth of the money collected has been used to finance clean energy and environment projects as was intended, our analysis of government data shows.

Though the cess was envisaged to fund “research and innovative projects in clean energy technologies”, funds accrued were spent on general environmental projects, we found, and in some cases, to reduce the Centre’s deficit and to compensate state governments after the Goods and Services Tax (GST), experts said.

Coal cess began at Rs 50 per tonne in 2010, rising to Rs 100 per tonne in 2014-15, and further to Rs 200 in March 2015, before reaching Rs 400 in March 2016, government data show. When rounded to the nearest dollar, the tax set at Rs 400 ($5.6) per tonne of coal produced and imported amounts to $6. In July 2017, the coal cess was subsumed under the Goods and Services Tax (GST).

The tax was first introduced by the United Progressive Alliance government in the 2010-11 budget, as a Clean Energy Cess which created the National Clean Energy Fund (NCEF), supporting research and development of clean technologies, said Vibhuti Garg, senior energy specialist at the International Institute for Sustainable Development (IISD), an independent think-tank.

However, in 2015, the NCEF became the National Clean Energy and Environment Fund (NCEEF), broadening its scope to not just clean energy, but also a clean environment, explained Chirag Gajjar, senior manager and lead for mitigation at the World Resources Institute India (WRI India), a global research organisation.

Of the Rs 29,645 crore transferred to NCEEF, Rs 24,614.49 crore was allocated to four ministries, government data cited above show.

From this allocation, 69% went to the Ministry of New and Renewable Energy, including the Green Energy Corridor, Jawaharlal Nehru National Solar Mission (JNNSM) and Solar Photovoltaic (SPV) technology Power Plants. The remaining 31% went to a variety of other environmental projects such as installation of SPV water pumping systems, National Mission for Clean Ganga, and National Mission for Green India.

Up until 2017-18, less than a fifth of the Rs 86,440 crore ($12 billion) generated from the tax has gone towards clean energy investments, data show.

In addition, much of the money originally transferred to the NCEEF did not end up being put towards energy or environmental projects at all, and was unaccounted for, Garg said.

For example, about 79% of money transferred to NCEEF was not spent on projects in 2011-12, and 83% in 2012-13, as described by the Ministry of Finance’s report of the National Clean Energy Fund.

Source: National Clean Energy & Environment Fund brief 2017-18 data

Between 2010-11 and 2017-18, the portion that did not reach NCEEF was used to reduce the deficit of the central government’s accounts, said Garg.

Since 2017-18, 100% of the tax has been used by the Centre to compensate state governments’ revenue shortfall following introduction of GST, explained Apurba Mitra, policy lead for climate and energy at WRI India.

Does the cess still help?

The tax does increase the financial incentive to use clean energy in India by increasing the cost of producing coal compared to clean energy, said Gajjar.

“Clean energy has been growing even without the fund, which was inefficient,” he added. “India is now at 82 GW, more than halfway to target of 175 GW by 2022 that was announced in 2014. Such progress has prompted [the] more optimistic target of 400 GW for 2030, announced by Narendra Modi at the United Nations Secretary-General's Climate Action Summit 2019 in New York.”

However, to reach 400GW, not just coal tax but investment in clean energy will be needed, Garg said. 

At the moment, 75% of India’s electricity generation still relies on coal, and only 10% comes from renewables, Garg said. “For renewables to become the base source of energy, we will need a lot more funding into better renewable technologies such as storage batteries and grid balancing. This was the purpose that this tax revenue was supposed to fulfil.”

(Habershon, a graduate from the University of Manchester, is an intern with IndiaSpend and FactChecker.in.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

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