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Coal-based power generation is set to be cheaper in India due to dual impact of GST and likely softening of prices of imported fuel following port restrictions imposed by China beginning July 1.
According to a private power company, cost of generation will be down by 3 paise a unit, which is approximately one per cent of the current open market tariff, due to GST on domestic coal. Most of the companies, including the State-owned NTPC, are yet to assess the impact.
The 5 per cent GST on coal replaced Central and State taxes but continued with ₹400 a tonne green cess, royalty and cess. The actual impact will vary depending on the value of coal used by power plants.
The lower generation cost will be passed on to Discoms by State-owned and a few private sector players operating under regulated tariff regime. However, for majority of private sector gencos which are suffering from low returns, GST benefits may come as a reprieve.
Companies using imported coal — mostly for blending purposes — may also expect softening in import bill as prices of Indonesian coal dropped by 90 cents during the last two trading sessions on Friday and Monday to end at $41 a tonne (for 4200 GAR variety) anticipating softening of demand from China.
China moveIn a surprise move last week, China banned coal imports through a number of second-tier ports — in Fuzhou, Guangdong Guangxi and Hainan provinces — without citing any reason. The duration of the ban is not specified either. Reports available in the international media linked it to China’s attempt to shore up prices of domestic coal which was suppressed for some time. According to Deepak Kannan, Managing Editor of Asia Thermal Coal of Platts, as Indonesian coal market reopened last week after long Ramadan leave, prices started softening. An Indian coal importer, who did not want to be quoted, expects Indonesian prices to reduce by $3 a tonne over the next few weeks.
Coal importsAccording to IHS McCloskey Coal report, India imported 18.76 million tonnes of thermal coal, mostly from Indonesia, in April . This is against 18.19 mt imports in the same period last year. The imports were down in May at 18.31 mt (17.05 mt). The country imported 159 mt of thermal coal in 2016, down from 170 mt in the previous year.
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