(Yicai Global) April 29 -- China is waiving tax on coal imports temporarily starting May 1 to reduce the price imbalance between imported and domestically produced coal. But the cut is expected to have little effect, Shanghai Securities News reported today, citing an industry analyst.

Import tax for coal will be reduced to nil from the previous most-favored-nation rate of between 3 percent and 6 percent, the Ministry of Finance said yesterday. The tax exemption will last from May 1 to March 31, 2023.

“The move is mainly to reduce import costs,” said Zhang Jianhong, senior engineer at China International Engineering Consulting Corporation. At the moment the cost of foreign coking coal, even at zero tariff, is still almost CNY400 (USD60) more expensive per ton than the domestic equivalent.

Doing away with the between 3 percent and 6 percent tax hardly makes any difference, only reducing prices by between CNY30 (USD4.50) and CNY100 per ton, Zhang added.

China imported 16.4 million tons of coal in March, a dive of 39.9 percent from a year earlier, according to the General Administration of Customs. In the first quarter, imports sank 24.2 percent to 51.8 million tons.

The current high price of foreign coal is the main factor inhibiting imports, Zhang said. Increasing imports can ensure supply, guide downstream enterprises to reduce coal consumption and promote the upgrading of the coal industry. However, until international energy prices fall, China’s coal imports are not likely to increase much.

China imports most of its coal from Indonesia. Russia is its second-largest source while Mongolia and Canada are also suppliers.

Editor: Kim Taylor