Coal was given freedom from duties
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The effect of the unexpected exemption of coal exports from foreign exchange duties will amount to $1.1–1.5 billion per year, which is up to a quarter of the net profit of the coal sector. According to analysts, the government, in making such a decision, could take into account the logistical difficulties of coal companies, as well as the return of China, the main market, to levying import duties on Russian coal. On the other hand, the abolition of the exchange rate duty potentially opens the way for the Ministry of Finance to increase the mineral extraction tax on coal, which was considered by the ministry at the beginning of 2023.
The abolition of the exchange rate duty on thermal and coking coals and anthracites for supplies to the main export markets – China, India and Turkey – could allow Russian exporters to save about $1.1-1.5 billion this year, Kommersant calculated based on customs data these countries. The Federal Customs Service of Russia no longer publishes data on the value of Russian exports broken down by product.
The government has removed thermal and coking coals, as well as anthracites, from exchange rate export duties, as follows from Resolution No. 2338 of December 27, 2023. The exchange rate duty was introduced in September last year and amounts to 4–7%. Its validity ends at the end of 2024.
Industrial expert Maxim Shaposhnikov estimates savings from the abolition of the exchange rate duty for coal at $1.2–1.4 billion, which, according to him, is a significant share of the profit of the coal sector. Thus, according to Rosstat, the net profit of the industry in January-October 2023 amounted to 403.2 billion rubles, having decreased by 49% year-on-year against the backdrop of a decline in export prices. In his calculations, Maxim Shaposhnikov assumed that coal exports in 2023 amounted to about 220 million tons, of which 40–45 million tons were metallurgical coal. The average FOB price of metallurgical coal was $170 per ton, and thermal coal was about $100. At the current ruble exchange rate, the duty would be about 5.5%. In November 2023, the Kuzbass government estimated the annual losses of coal companies in the region from the introduction of exchange rates at 82.6–174.2 billion rubles. depending on the dollar exchange rate.
Since the introduction of the exchange rate duty, various industries have been asking for the removal of this measure. Coal did not figure in these conversations, although the first deputy chairman of the Kuzbass government, Igor Malakhov, said in November that as a result, collections from the income tax of coal companies (credited to regional budgets) would decrease; the lost amount could amount to 14–29 billion rubles. per year only for the Kemerovo region.
According to Boris Krasnozhenov from Alfa Bank, the withdrawal of coal may indicate the authorities’ desire to maintain the competitiveness of Russian exporters. China at the end of last year decided to return the duty on coal imports from Russia to 3%. Exports to China account for about 50% of total Russian coal exports, reminds Boris Krasnozhenov. “The coal industry is closely connected with the development of the Northern Sea Route and new logistics routes, which determines its strategic status,” the analyst believes.
However, the decision to exempt coal from the duty may have a different logic. The Ministry of Finance considered the possibility of increasing the mineral extraction tax on coal in the fourth quarter of 2023 (see Kommersant, April 10, 2023), but in September an export duty was introduced, which also affected coal. In November 2023, Deputy Minister of Finance Alexey Sazanov, in an interview with Vedomosti, answering a question about the possibility of increasing the mineral extraction tax, said that “an export duty on coal has already been introduced in relation to the ruble exchange rate.” According to him, there were no plans to make changes to increase taxes on the mining and metallurgical sector during the autumn and spring sessions of the State Duma. Kommersant sent a request to the Ministry of Finance.
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