• The introduction of Goods & Services Tax (GST) has thrown a spanner in India’s clean energy transition, implicitly favouring coal-fired power over solar photo voltaic (PV) generation and incentivising greater take up of coal based sources, a study shows.
• The study commissioned by Canada based International Institute for Sustainable Development (IISD) and Council on Energy, Environment & Water (CEEW) says post the roll out of GST, the levelized cost of energy (LCOE) for existing coal-based thermal power stations has fallen by one or two per cent, depending on the share of imported coal used. On the contrary, LCOE for solar PV has risen six per cent. This does not take into account the cost of uncertainty for solar PV developers, who have not known how their projects would be treated under the new taxation system until the recent clarification in December 2018 by the GST Council.
• The LCOE computation for coal-fired thermal power was done assuming a typical 500 Mw capacity. A significant proportion of such plants between 2003 and 2016 are 500 Mw in size, influenced by both fixed and variable costs.
• Overall, the variable LCOE of a coal thermal power plan, assuming that it uses only domestic coal decreased by almost 1.6 per cent post-GST reform. Plants using a mix of domestic and imported coal would see a smaller decrease of one per cent, largely due to the influence of higher taxes on imported coal.
• The LCOE is a metric that permits comparison of the costs of electricity generation across various generation sources. It represents costs on a per kWh basis accounting for the total lifetime of a project. The costs of any project consist of two components—fixed costs and variable costs. There is no fuel cost for solar PV, and other variable costs, such as operations and maintenance, are small. As a result, the LCOE for solar PV generation is driven almost entirely by the estimated capital cost. On the other hand, the LCOE for coal thermal power is sensitive to both the variable cost of fuel and the capital investment required.
FM Logistic have announced plans to invest $150m over the next five years in its own warehouses and distribution centres in India.
As part of the investment, the company will start operating a multi-client facility in Delhi National Capital Region in April 2019 and expand its multi-client warehouse in Mumbai. FM Logistic has also acquired 31 acres of land in Jhajjar, near Gurugram, to build a new warehouse. Once set up, the facility designed by FM Logistic’s sister company, NG Concept, will provide 70,000 sq m (750,000 sq ft) of warehousing space for up to 100,000 pallets. In addition to increasing its warehousing and transport capacity in India, FM Logistic is investing in a new warehouse management system and transport management system to provide its customers with more visibility over their shipments.
The investment is partly motivated by the growth potential in logistics offered by the indirect tax reform (Goods and Services Tax, or GST) implemented by the Indian authorities.
Jean Christophe Machet, CEO, FM Logistic said: “We see a huge potential in the Indian market, following the acquisition of Pune-based Spear Logistics in 2016. The GST reform has already enabled us to streamline and optimise the efficiency of our operations. We expect a strong double-digit growth in India in FY 2019-20.”
Some States seek changes in definition, freedom to fix ceiling for levying taxes
The GST Council is likely to consider changing the definition of ‘affordable housing’ for the purpose of levying indirect tax. A full-fledged meeting of the Council will take place after the formation of the new Government at the Centre and in some States after the elections.
A senior government official said States such as Maharashtra, Gujarat and Delhi sought changes in the definition of affordable houses. The issue was raised during the GST Council meeting on Tuesday but could not be considered due to the Model Code of Conduct in place. “The Council could take up this matter in its meeting post election,” he said while adding that the States could be allowed to fix the ceiling for taxability.
The GST Council, in its meeting on February 24, redefined affordable house as a house/flat of carpet area up to 90 sq metres (sq m) in non-metropolitan cities/towns, and 60 sq m in metropolitan cities having value up to ₹45 lakh (for both). Metropolitan cities include Bengaluru, Chennai, Delhi-NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region). Both the conditions need to be fulfilled for the affordable home tag. From April 1, such a home would attract GST at the rate of one per cent but without input tax credit.
The Maharashtra Government wants the ceiling to be ₹60-70 lakh or even ₹75 lakh as it believes this is the ‘realistic’ price level, especially in and around Mumbai. Gujarat also supported the suggestion. Similarly, some States favoured freedom to fix the ceiling rather than having a uniform ceiling as the cost varies from State to State. The official said all the options will be considered in the next meeting of the GST Council.
As of now, there are multiple definitions of affordable housing. In July 2014, the RBI defined affordable housing loans as eligible under priority sector lending, as also housing loans to individuals up to ₹50 lakh for houses of values up to ₹65 lakh located in the six metropolitan centres (Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad) and ₹40 lakh for houses of values up to ₹50 lakh in other centres for purchase/construction of dwelling unit per family.
Similarly, the Ministry of Housing and Urban Affairs defines affordable housing on the basis of carpet area which could be between 30 sq m and 200 sq m. These dwelling units can be part of schemes such as the Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of a State government or even by a project developed by private developers. Till March 31, such units will attract GST at the effective rate of 8 per cent with input tax credit.
Depending on the quantum of green energy being generated by solar and wind plants and to make thermal power stations more flexible to accommodate renewable energy, tariffs of coal-based electricity may be raised by as much as Rs 0.45/unit.
An increase in the average daily coal production from Coal India & fuel supplies and reduced power demand during winter has led to an improvement in coal availability in thermal power plants. The number of plants having critical stocks reducing to nil.
There are a few coal plants with stocks ranging between one day and three days, but they are not considered critical since they are close to mine mouth or have consumed majority of their coal quota for the period.
There are enough stocks at pithead and non-pithead power plants.