India Increases Coal, Lignite Royalties, Raising Fuel Prices

India’s cabinet increased royalties on coal and lignite, meeting a demand by mineral-producing states seeking to increase revenue and raising prices of the fuels used to generate electricity.

The royalty on coal will increase to a flat 14 percent of the notified price and on lignite to 6 percent, according to a Press Information Bureau statement. Coal is now charged at 5 percent and a fixed levy ranging from 55 rupees ($1) to 130 rupees a metric ton and lignite 2 percent and 45 rupees a ton.

State governments are trying to boost finances as federal allowances weaken amid the slowest quarterly economic growth in almost three years. The resource-rich states, including Jharkhand, Orissa, Chhattisgarh and Madhya Pradesh, will earn combined annual revenue of 69.8 billion rupees, an increase of 17 percent, according to the statement. Royalty, last changed on Aug. 1, 2007, has always been passed on to consumers.

“Royalty is neutral to the coal company,” S. Narsing Rao, chairman of Singareni Collieries Co. and chairman designate of Coal India Ltd. (COAL), said by phone yesterday. “The impact is only on the coal consumer.”

India’s electricity generators including NTPC Ltd. and Tata Power Co. are struggling with high prices of imported coal as output of the fuel in India lags behind demand. Electricity generation fell short of peak demand by 12.1 percent in February compared with 11.7 percent a month earlier.

State-owned Coal India accounts for about 81 percent of the mineral produced in the country, according to the company’s website. Output was 435.8 million tons in the year ended March 31.

Royalty paid to nine states in the year ended March 2011 was 55.5 billion rupees, Coal Minister Sriprakash Jaiswal told parliament on Aug. 8.

To contact the reporters on this story: Abhijit Roy Chowdhury in New Delhi at achowdhury11@bloomberg.net; Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net

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