Coal tax

The Indian government has proposed a coal tax aimed at creating a fund for promoting clean energy. Indian Finance Minister Pranab Mukherjee said a clean energy tax of $1 per metric ton would be applied to domestic and imported coal. The minister also proposed tax incentives to boost investment in solar, wind and geothermal power generation.

The National Clean Energy Fund is being created to fund research and innovative projects in clean energy technologies. Mukherjee did not specify a target for the fund but experts say the tax could raise about $543 million.

Mukherjee, in his annual budget speech to Parliament in New Delhi Friday, noted that coal is the "mainstay of India's energy sector" and 75 percent of the country's power generation is coal-based.

The country's demand for coal in 2008-09 reached about 550 million tons. While India achieved 5.4 percent growth in production in the last 35 years, production needs to increase to more than 7 percent. India's coal demand is expected to exceed 2 billion tons by 2031.

To implement the government's ambitious National Solar Mission launched in January, Mukherjee proposed to slash customs and excise duties as well as service taxes on a range of solar-related projects. This includes a concessional import tax rate of 5 percent on machinery and equipment needed to set up solar power plants.

Solar power in India costs about 2 1/2 times more than power from coal.

Is the coal cess enough or is it too much? Depends on how you view it. Write in to us. Also, do you think the solar incentive is encouraging enough?