Now pay more for electricity: CCEA allows power firms to pass on coal costs

New Delhi: Electricity tariff will rise by a15-17 paisa per unit in near future after the Government todayallowed power companies to pass on the cost of imported coalto consumers.

The Cabinet Committee on Economic Affairs (CCEA) approvedthe proposal to boost power generation by using imported coalas domestic output falls short of demand, triggering powercuts in several places.

The move could help bring as much as 78,000 MW ofgeneration capacity on stream.

“There will be small increase in power tariff. It willbe very marginal increase on unit cost of power depending upon the cost of import of coal,” Finance Minister P Chidambaramsaid briefing reporters on the decision taken by CCEA headedby Prime Minister Manmohan Singh.

The decision will be implemented by July-end and changesin power rates will be reflected in tariff revisions that states may announce in due course of time. States may decidenot to pass on the increase by subsidising power generation.

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“There is a famous saying that no power is costlier thanno power. The choice is pay more for electricity or you don’t get electricity at all… It is better to have power plantworking and producing power than have no power at all,” he said.

Chidambaram said important reform measures in the coalsector will be announced next month to help boost domestic production.Stating that the CCEA decision will pave way for greateravailabilty of fuel, Power Minister Jyotiraditya Scindia said,“as far as increase in tariff is concerned it would only befrom the component which will be imported. But theavailability of fuel would increase.”

Power sector has hailed the move to pass-through cost of imported coal as the decision is likely to help many power companies.

“It is a very positive development, it will bring backcertain companies which were suffering due to these anomalies since there was a huge movement in the cost of fuelinternationally,” Isaac George, Director, GVK Power said.

Power producers until now were not allowed to fully passon the cost of expensive coal imports they resorted to for meeting shortfalls from domestic mines.Welcoming the announcement, Tata Power said: “Based onour present understanding, this order is only limited todomestic coal based plants that were dependent on imports tomeet the domestic coal shortfall, wherein it replaces theearlier planned price-pooling mechanism.”

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India has total installed capacity of about 212,000 MW.“Very large capacities stand stranded today in India(because of) lack of coal, lack of gas,” Chidambaram said.

“Many power plants are stranded, producing no power. Someare producing below capacity, therefore for the interim periodthere is no option but to import coal. Imported coal iscostlier than domestic coal,” he added.He promised more decisions in July to boost domestic coalproduction.

“We must increase the production of coal in India. Wecannot import so much coal. By the first week of July, certain

other decisions will be taken to open up more coal mines andto produce more coal,” he said.Coal Ministry said it will implement the decision withina month.

“The decision will be implemented over a period of onemonth as bulk of activities have to be done. The activities include issuing suitable orders by the Ministry supplementingNew Coal Distribution Policy. Ministry of Power will also issue appropriate advisory to Central Electricity RegulatoryCommission,” Coal Secretary S K Srivastava told PTI.

Modifications, if any, would be done in bidding norms toenable appropriate commissions to decide pass through of higher cost of imported coal on case to case basis, he added.

“They (IPPs) can import coal themselves if they wish,otherwise Coal India will import and this additional price which we pay for imported coal, obviously, has to be passthrough in the power tariff,” he added.A Coal Ministry official said though the quantum of thecoal to imported has not been worked out but as per estimates"if Coal India imports 15 per cent of coal", it would resultin increase in electricity tariff by “15-17 paise per unit”.

Chidambaram said the government has initiated measures toaugment production and “by first week of July certain other decisions will be taken to open up more coal mines and toproduce more coal”.“In the interim period, there is no option but to importsome coal. Imported coal is costlier than domestic coal. Weare guaranteeing 65 per cent this year to 75 per cent by theend of 12th Plan (by Coal India) for these 78000 MW capacity.”

Chidambaram said significant power capacities standstranded today in India due to lack of coal and gas.Elaborating on power tariff increase, he said: “We can’ttoday estimate what will be the increase in cost of power andcertainly it will not be uniform. It will depend upon powerplant to power plant and where it is located.”

He said while it was difficult to arrive at the quantumof increase at present, it would be “very marginal increase in the unit cost of power” if “we are able to guarantee thembetween 65 per cent and 75 per cent in the terminal coal of the domestic coal and if they import some coal to top it up”.

A Power Ministry official said it would be very difficultat this point in time to ascertain the increase in power tariff as it would be done on a case by case basis. Coal Minister Sriprakash Jaiswal said the decision would not affect signing of fuel supply pacts by CIL with powerfirms.

Association of Power Producers Director-General AshokKhurana said: “We are very happy. Our two years of hard work has finally paid off. This (the decision) will help 78,000 MWof capacity of which 38,000 MW is new capacity.” Tata Power said: “Government needs to help expeditedecision on a similar mechanism for the imported coal based projects, which have been impacted due to extraneous factorswell beyond the control of developers. This is essential for the sector to use its imported coal based asset effectively,competitively & for them to contribute to the economy.”

PTI