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NTPC seeks waiver of customs duty on coal imports

State-run power generating company NTPC has asked the finance ministry to waive the customs duty levied on importing coal.

"We are seeking this proposal only till the time domestic supplies improve," says NTPC Chairman and Managing Director Arup Roy Choudhury.

The total customs duty on coal imports is currently 4.16 per cent, and NTPC executives say it can easily pass on the benefit of a duty cut to consumers.

In April, NTPC floated global tenders to import seven million tonnes of coal to feed 12 power plants. Company executives say NTPC has a target of importing 15 million tonnes of coal in the current fiscal year. "This is largely because we have not been able to source coal domestically," says an executive.

During the last fiscal year, NTPC imported 10 million tonnes of coal. On a whole, India imports coal worth $16 billion from Indonesia, South Africa and Australia.

Choudhury says NTPC has also requested the finance ministry to refund the custom duty that the company paid to import coal from Indonesia in the last fiscal year. He cited the free trade agreement India has signed with ASEAN countries, which makes steam coal eligible for exemption. "We have sent them the papers for the same," he added.  

NTPC hopes duty exemption will lead to ease of doing business in the power sector, although it is unlikely that the finance ministry will agree to the company's request as such a move might impact government revenue. NTPC has an installed generation capacity of more than 43 gigawatt, or one-sixth of the country's total installed capacity.

The company has also demanded exemption of duty on import of naphtha required to fuel some power plants. Currently, the duty is at 14 per cent. Besides, it has sought clarifications from the finance ministry on tax deducted at source (TDS) payments on arbitration awards even if the amount is still in contention. It wants that in the upcoming budget the finance minister allows the company to pay taxes only on payments actually received.

The power giant also wants instructions for the income tax department from the finance minister on withholding tax related to payments to foreign contractors dealing in design, manufacture, supply, fabrication, installation and commissioning of equipment. "We generally give such contracts on a turnkey basis to a single consortium, but tax authorities treat these contracts as indivisible and demand taxes on design and supply (these activities are largely done out of India), despite a series of judgments from various courts including the apex court," says a senior NTPC executive. Choudhury adds that no withholding tax should be deducted on payments related to the activities carried out outside India.

Source: Business Today