S Korea to tax coal for power from July 1

SEOUL, Jan 23 (Reuters): South Korea plans to impose a tax on coal used for power generation and lower taxes on fuels used for cooking and heating from July 1, to reduce consumption of electricity to avoid blackouts during peak demand periods.

Asia's fourth-largest economy has struggled over the last 1-1/2 years to avoid outages during periods of high power demand due to a nuclear safety scandal and related reactor closures.

Officials expect the tax revision to curb power use because of higher coal prices, and boost consumption of liquefied natural gas (LNG), fuel oil and propane gas.

Rural households could use propane and kerosene instead of electricity for cooking and heating, while industries could use natural gas or other fuels for manufacturing processes.

"The government aims to lower power demand and boost demand for other fuels by hiking electricity fares or the taxes on coal for power generation," a finance ministry source said, referring to the policy revealed in a ministry statement on Thursday.

The government first unveiled the idea for the tax policy revision last November when it announced an increase in electricity tariffs in a bid to curb winter power demand.

The ministry of finance said in Thursday's statement it plans on July 1 to impose a tax of 17 won ($0.02) per kilogram on coal with a net calorific value below 5,000 kilocalories per kilogram, and 19 won per kg on coal above 5,000 kcal/kg.