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GST, a big blow to clean energy financing

According to reports, it was India’s carbon tax; it was thought to be a source of funding clean energy projects, to combat climate change. Now it is being thrown out of the window.

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

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

Now, the cess is to go to feed the GST Compensation Fund, a fund meant to compensate various state governments for any loss in revenue arising out of the goods and services tax – giving funding of climate change combat a go-by.

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

Many are aghast.

“This is a complete let-down,” says Rajya Sabha member and former Minister for Environment & Forests Jairam Ramesh, 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 Business Line today.

Chandra Bhushan, Deputy Director General, Centre for Science and Environment (CSE) has expressed anguish over the use of clean energy cess for compensating states. “This is not the right thing to do,” he said, adding that the money should be used only for clean energy projects, which need a lot of funds.

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

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 Rs. 10,239 crore from the NCEF, Minister Piyush Goyal told the upper house on March 20. He further said that MNRE would get Rs. 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?

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