Economics Prelims cum Mains

Panel pulls up govt. for diverting coal cess

The News

  • Recently, the Parliamentary standing committee on energy in its 42nd report on stressed gas-based power plants was tabled in Parliament.
  • The Panel has pulled up the government for diverting coal cess, i.e. the funds of the National Clean Energy Fund (NCEF).
  • The Panel also recommended financial support to the stressed gas-based power projects in the country from NCEF.

How Cess is different from Tax?


  • All revenue received by the government by way of taxes—like income tax, central excise, customs and other receipts are credited into the Consolidated Fund, which has been constituted under Article 266 (1) of the Constitution of India.
  • The funds so collected are then allocated to various purposes proposed in the Budget.


  • A cess imposed by the central government is a tax on tax, levied by the government for a specific purpose.
  • Article 270 of the Constitution describes a cess.
  • The cess should be kept as a separate fund after allocating to Consolidated Fund of India and can be spent only for a specific purpose. This means cess can be spent only for the specific purpose for which it is created.
  • The funds need not be shared with the State governments and are thus at the exclusive disposal of the union government.
  • If the purpose for which the cess is created is fulfilled, it should be eliminated.


About National Clean Energy Fund(NCEF)

  • The National Clean Energy Fund (NCEF) is a fund created in 2010-11 using the carbon tax i.e. the Clean Energy Cess.
  • It was created out of cess on coal at ₹400 per tonne.
  • The purpose of the NCEF is for funding research and innovative projects in clean energy technologies of public sector or private sector entities, upto the extent of 40% of the total project cost.
  • An Inter Ministerial Group chaired by the Finance Secretary was constituted to approve the project/schemes eligible for financing under NCEF.
  • Since June 2014, NCEF also finances the schemes or programmes of Ministry of New and Renewable Energy, if balances are available with the NCEF after financing projects approved by the Inter-Ministerial Group. This is done with only after the approval of Finance Minister.

Purpose of the Clean energy Cess: to support clean energy initiatives

What is the issue?

  • Diversion of Coal Cess/ Clean energy Cess to compensate States for revenue loss post-GST.
  • Diversion of this fund to unrelated activities reflects poorly on our commitment towards cleaner environment and shows government’s apathy towards clean energy projects.

Limited share of Gas based power projects in India:

  • Natural gas is a clean fuel as compared to coal and can be efficiently used in power generation.
  • As the domestic coal supply is generally of low quality with low calorific values, high degree of ash content and its adverse impacts to the environment, Government of India encourage gas based power generation in India.
  • India has total installed capacity of about 345 GW of power, with 7.2% (25GW) of gas-based capacity.
  • However, its share in terms of generation is only 3.8% (14,305.30 MW) of gas-based capacity.
  • Reason: Non availability of domestic gas and unaffordability of imported gas.
  • Consequence: Large amount of assets in this sector have turned ‘non-performing’ or ‘unproductive’.
  • Solution: Financial support to the stressed gas-based power projects in the country from NCEF.


  • As demand for energy is picking up due to government’s efforts in electrifying all households, revival of gas-based plants will help provide clean energy.
  • The revival will also help all these plants service outstanding debt of ₹50,000 crore with banks.

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