The
government plans to put in place a framework for the revision of power tariffs
for operational projects that are facing an additional cost burden due to Coal
India’s (CIL) inability to supply fuel that was assured when the projects were
set up.
The
ministry of power has written to the Central Electricity Regulatory Commission
(CERC), seeking its advice on how to tackle the fuel availability risk for
operational projects where long-term supply pacts have been inked with
distribution companies (discoms). Any positive gesture from CERC could benefit
projects totalling 37,680 MW, owned by NTPC and private utilities.
“Over
37,000 MW of operational projects and 28,000 MW of upcoming projects have
slowed as CIL has not been able to meet its supply obligations. Companies had
invested in these projects because the government had assured fuel
availability. But now CIL is unable to supply (coal), and we have to import
expensive fuel to meet our power-supply obligations. It’s crucial to have a
provision to pass on the additional cost to customers and keep power projects
financially viable,” said Ashok Khurana, director general of Association of
Power Producers (APP).
A
steep rise in coal prices, supply shortage and the inability of power producers
to pass on the additional cost to discoms and consumers, have raised doubts
about the viability of power projects. The government has, so far, not taken a
stand on projects which are already operational and supplying power, as
promoters of these projects must individually renegotiate their respective
contracts with discoms, which is a lengthy and difficult process, sector
players said.
“Imported
coal can be 40% more expensive than domestic coal and we need to pass on this
cost to save these projects from being unviable,” said Vinayak Chatterjee,
chairman and co-founder of infrastructure consultancy firm Feedback
Infrastructure.
CIL
may only supply 60-65% of the annual contracted quantity to power producers,
but in 2008-10, these projects were assured enough coal to run at 85% capacity.
In
a letter to CERC, a copy of which is with ET, the power ministry says, “In the
case of powerpurchase agreements, which have already concluded between
developers and discoms, the project owner may have to use imported coal to bridge
the shortage of domestic coal…CERC is requested to advise the government on the
manner in which the problem of fuel availability can be addressed, with regards
to the power producers who have already entered into longterm Power Purchase
Agreements with discoms.”
The
power ministry cites that in February, the Cabinet Committee on Economic
Affairs (CCEA) had decided that for projects commissioned between April 2009
and March 2015, CIL would supply imported coal on a cost-plus basis to
producers willing to buy such fuel and that the higher cost of imported coal
will have to be allowed as a pass through.
Recently,
CERC gave a breather to companies like Tata Power and Adani Power by allowing
them to get “compensatory tariff ” to make up for the steep rise in imported
coal prices. The government is also in the process of notifying a standard bid
document which will address issues of tariff revision for new projects.
But
these measures do not apply to operational projects where the power purchase
agreements have already been sealed. A senior executive from CERC said that the
order on Tata Power and Adani Power related to a change in foreign law
resulting in a rise in the price of coal, and can therefore not be used as
precedence in this instance. But he said that the CERC would consider the
collective problem of the power sector due to CIL’s inability to supply
adequate fuel and suggest generic measures that states can adapt.
Source:
ET 13/05/2013
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