India to hike power tariff

NEW DELHI, Dec. 29 (UPI) -- Power tariff in India may go up as the government has decided to revise coal royalty rates, shifting from present specific rate to ad Valorum system.

It is also considering a proposal to allow states to levy up to 5 percent cess on coal over the royalty, The Economic Times newspaper reported Wednesday.

The proposals may push the overall coal prices by up to 25 percent, much to the discomfort of the power sector, the prime consumer of the coal.

"The government is considering shifting to the new system of royalty where rates may be fixed at 20-22 percent of coal prices," said a power ministry official.

He said a note from the coal ministry specifying the changes would soon be put before the Cabinet for approval.

A change in the government's proposal in favor of ad valorum royalty rates has come in the wake of strong support from the energy coordination committee headed by Prime Minister Manmohan Singh, the spokesman said.

A Coal Ministry committee on coal and lignite royalty had earlier suggested shifting royalty rates on coal to a mix of specific and ad valorum duties.

A report by economic advisory council of the prime minister had also favored the move. Under pressure from the provincial governments, the ECC at its recent meeting also favored advancing implementation of internationally acceptable ad valorum royalty.