Power tariffs may rise after hike in freight rates for coal

Electricity tariffs may rise as railway minister Suresh Prabhu on Thursday increased freight rates for coal by 6.3%, which would increase transportation cost for power producers. An official of state-run miner Coal India said that the impact of freight rate hike would be on the landed cost of coal. Another official said that the freight is paid by the consumer so the PSU “would not be impacted by the change.” Leading power producer NTPC said that cost of production would rise by about 4-5 paise due to the freight rate hike. “Around 2% increase in cost of generation … i.e. about 4-5 paise,” the PSU said. The Association of Power Producers (APP) said that the increase in freight rates would have a direct impact on power retail tariff—depending upon the distance from the mine, the power tariff would increase from about 5 paise per unit, which shouldn’t be difficult to absorb. “However, this increase in revenue should result in increased rakes for power sector to ensure full materialisation of committed quantity of coal by CIL (Coal India Ltd),” it said.

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