India Coal Ministry Said to Seek Environment Tax on Petcoke

  • Lack of a tax gives petcoke an unfair price advantage
  • Petcoke is a substitute for coal in making cement, sponge iron

India’s coal ministry, at the urging of state miner Coal India Ltd., is asking the government to levy an environmental tax on a competing fuel in effort to maintain coal’s cost-competitiveness, according to people with knowledge of the matter.

Petcoke, an oil-refining byproduct and a coal substitute, is more polluting than coal and should be subject to the same federal taxes, the coal ministry said in a letter to the finance ministry, according to officials with knowledge of the matter, requesting not to be identified because the information isn’t public. India doubled the clean-environment tax on coal this year to 400 rupees ($6) a ton, as part of its global climate commitments.

Petcoke prices fell with the collapse in crude oil, luring some coal users. Although prices have recovered in recent months with oil, they are still less than coal when measured on a heat-value basis, according to Prashant Tripathi, group head of manufacturing at Dalmia Cement Bharat Ltd., which uses petcoke at its plants. A tax may crimp demand for petcoke and raise costs for users, who may be forced to switch back to coal. Top Indian producers of petcoke include Reliance Industries Ltd., Essar Oil Ltd. and Indian Oil Corp.

The coal ministry’s recommendations are based on a presentation from state-run Coal India Ltd., which said the lack of a tax on petcoke gives it an unfair price advantage, according to three of the people.

Reliance Industries rose 1 percent to 1,014.10 rupees and Indian Oil also climbed 1 percent to 544.35 rupees at the close in Mumbai on Thursday. The benchmark S&P BSE Sensex advanced 0.3 percent.

“Petcoke prices have already hardened by as much as 1,500 rupees a ton in the past three months,” said Binod Modi, an analyst at Mumbai-based Reliance Securities Ltd. “Limited availability is another issue with petcoke. With rising costs and limited supplies, we expect cement companies to switch increasingly back to coal.”

A Coal India spokesman didn’t immediately respond to an e-mail and a phone call seeking comment. The coal ministry asked for time to respond. D.S. Malik, a finance ministry spokesman, declined to comment.

Winning back customers will help ease the country’s coal glut after production last financial year by state-run Coal India rose by the most since at least 2010, when it was publicly listed.

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