Power Companies with Coal Block Linkage or Assured Fuel Supply may have to Cap Electricity Selling Rates

Power Cos with Assured Fuel may have to Cap Rates

Govt feels cos are profiting at the cost of consumers and distribution firms

SARITA C SINGH NEW DELHI 

Electricity consumers are poised to gain as the government plans to cap costs of power supplied from projects with captive coal blocks and assured fuel supply from Coal India Ltd.

The government feels that power companies with free fuel supply from captive mines are profiting at the cost of consumers and distribution companies by charging tariff that is not reflective of costs.

The power ministry wants to revise tariffs of projects that do not have long-term power supply commitments or are selling electricity in short term open markets. The ministry also proposes to consider efficiency of projects to award power supply contracts in future and allow fuel costs to be passed through for the benefit of imported coal-based plants. The ministry has set up a committee under additional secretary Ashok Lavasa to review bidding norms of power projects. Private power companies expressed their displeasure over the issue during the meeting that ended without any consensus. “Developers are quoting tariff based on anticipated bids from competitors rather than taking into costs into account. Companies with coal blocks thus have an unfair advantage over others as they are charging almost double of what is due to them,” a senior power ministry official said. 

He said companies with assured coal supplies unreasonably jacked up their prices after tariff from imported coal based projects rose further impacting state distribution companies whose annual losses are pegged at Rs. 27,000 crore.

“Plants running on imported coal quoted about 4.5-5 per unit since the fuel became costly. Developers with captive blocks started quoting on the same lines whereas they should have supplied power at not more than 2 per unit,” the official said.

He said tariff from a power plant fuelled by captive coal blocks or assured supply from CIL should be about 1.50- 2 per unit while they were charging the consumers anywhere between 4 and 8 per unit. The power ministry proposes to put a ceiling on the fixed cost component of tariff for all projects fuelled by coal blocks or other assured form of fuel supply.

Association of Power Producers director general Ashok Khurana said capping fixed cost component of power tariff was not possible “as pricing was a function of time”.

Fuel cost for projects is proposed to be pass through — a move likely to be resisted by captive coal block owners but comes as relief to companies with projects based on imported coal. Imported coal based projects are hit as the fuel prices rose due to changes in regulatory mechanism in exporting nations.

The power ministry also said companies should not be given further coal linkages if they charge higher tariff despite owning coal blocks.

Source: ET