Is GST compensation move dirtying clean energy funds?

M Ramesh Chennai | Updated on January 15, 2018 Published on April 13, 2017

Jairam Ramesh

Mining cess to make up for States’ losses in new tax regime

It was supposed to be India’s carbon tax. But is this source of clean energy funding being thrown out the window?

In the last six years, the Union government has collected around ₹54,000 crore by levying a cess on every tonne of coal mined or imported. When it was introduced in 2010 by then Finance Minister Pranab Mukherjee, it was ₹50 a tonne. It was gradually raised to ₹400 a tonne by Arun Jaitley.

Funds diversion

Less than half of the pooled amount has been given to the National Clean Energy Fund, and only around ₹10,000 crore of that fund has been given out for projects.

Now, the cess is to feed the GST Compensation Fund, which is meant to compensate various State governments for loss of revenue arising out of the Goods and Services Tax, thereby giving the climate change funding the go-by.

And this has been unobtrusively slipped into the Goods and Services (Compensation to States) Act, 2017, in a schedule.


“This is a complete let-down,” says Jairam Ramesh, Rajya Sabha member and a former Minister for Environment and Forests, who raised this issue in the Upper House on April 5.

“You cannot impose a carbon tax and then use it for compensating States,” Ramesh told BusinessLine today.

As recently as on April 3, the Minister for Environment, Forests and Climate Change, Anil Madhav Dave, told the Rajya Sabha, in a reply, that the Centre had “set up the National Clean Energy Fund by levying a cess of ₹400 per tonne of coal produced domestically or imported, for the purpose of financing and promoting clean energy activities in the country (emphasis added).”

Useful contributions

The NCEF, nourished by the cess, has been very useful in funding clean energy projects. In the three years between 2014-15 and 2016-17, the Ministry of New and Renewable Energy received ₹10,239 crore from the NCEF, Power Minister Piyush Goyal told the Upper House on March 20. He further said that MNRE would get ₹5,341 crore for 2017-18 “which will be sourced from NCEF.” The question is: if the cess collections are to go into the GST Compensation Fund, where will the NCEF get its resources from?

Published on April 13, 2017
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