Power ministry says coal price pooling can hike electricity cost

Electricity consumers across the country may have to pay about 50 paise more for a unit of power if the government allows a complete pass through of the cost of imported coal to be blended with domestic coal for firing the turbines of power plants.



The power ministry has told the finance ministry that pooling prices of imported and domestic coal can jack up the cost of electricity. Accordingly, the Central Electricity Regulatory Commission (CERC) should be tasked with fixing the fuel’s import prices at regular intervals to ensure uniformity in prices, it demanded.


In a note to the finance ministry, the power ministry said the proposal to execute coal price pooling for generating 67,000 MW thermal power essentially entails allowing prices of imported coal to be made a pass through, which has also been accorded in-principle approval by the Union Cabinet. The Cabinet is understood to be preparing to discuss the issue again next week.


Under the existing tariff regime, power utilities of Central and state governments are on a cost plus regime where any increase in fuel cost is automatically a pass through. However, for competitively bid projects the CERC can allow a price increase based on certain conditions like a proven force majeure, or change in law or government policy in tune with the provisions of power purchase agreements.


“The estimated increase in tariff for the bid out projects is likely to be 30-50 paise,” a power ministry official said.


The fuel supply agreements which CIL has


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