Budget 2021: Nirmala Sitharaman urged to announce clean fuel pricing reforms to control pollution

CHENNAI: The Centre for Science and Environment has urged Union finance minister Nirmala Sitharaman to include provisions in the Budget 2021 to incentivise clean fuels like electricity and natural gas to make them more competitive compared to

coal

.

The ‘second

clean fuel

revolution’ is possible only with taxation and pricing reforms in favour of cleaner fuels, the

CSE

has stated in a letter the finance minister. “Then, the displacement fuel was diesel for the transport sector. Now, the displacement fuel is coal. Its price is so low that natural gas, with its high tax burden, is unable to compete,” the letter said

"Natural gas has a high tax burden currently. It is taxed both at the point of sale and purchase, and this means that tax as a component of the final prices can be as high as 18% or more," CSE director general Sunita Narain wrote in her letter to Sitharaman.

Even though the proactive steps taken by the Union and state governments over the past few years have led to a distinct improvement in air quality in Delhi-NCR, a lot remains to be done to meet the clean air benchmark. “The next generation transition to meet clean air standards is not possible if access to affordable clean fuels is not scaled up across the region,” said Anumita Roychowdhury, executive director-research and advocacy, while speaking at a webinar by CSE on Friday.

"Since the early 2000s, Delhi’s primary air pollution mitigation focus has been to substitute diesel with compressed natural gas (CNG) in the transport sector, and replace coal, furnace oil and petcoke with natural gas in industrial areas and power plants. This has been primarily responsible for bending the pollution curve in Delhi," she said.

"This is an important learning for the rest of the country as 122 cities are currently implementing clean air action plans to reduce particulate pollution by 20-30% by 2024 under the National Clean Air Programme," said Roychowdhury. "Such a clean fuel strategy is also consistent with the global trend. Some of the most polluted regions of the world like Beijing have had to replace coal with clean fuels to achieve good air days."

To make this critical and necessary transition to cleaner industrial fuels, it is necessary to address the roadblock from cheap coal that undercuts the market for natural gas in India. This has been highlighted in a new CSE study Analysing Industrial Fuel Policy in Delhi and NCR States, which was released in the webinar.

The study is based on on-ground surveys of industry clusters in Delhi-NCR. It has uncovered widespread use of coal in industry. In fact, Delhi, even after notifying the approved fuel list that bans use of dirty fuels across all sectors, is finding it difficult to enforce this in dispersed small and medium scale units.

“Gas, unlike coal, is not included in GST. The state tax share of natural gas relative to the total petroleum product revenue was roughly 20% for Gujarat and 7% for Maharashtra in the past year. Replacing this for such large industrial states should not be an obstacle," it said. “Our understanding is that with 5% GST (instead of 18% state VAT and other taxes), the price for the industry consumer will reduce by 17%. As gas has a higher calorific value and lower management costs, it will become attractive for industries to switch from coal to this cleaner fuel.”

This can help the country fight air pollution not only in Delhi and the National Capital Region, but across India, it said.