Amid a worsening power shortage in the country, several state power regulators including those in Karnataka, Tamil Nadu, Gujarat  and Maharashtra have either invoked or will soon use a contingency clause to step up power supplies by allowing pass-through of higher fuel costs. Other states too may announce similar plans in the coming days as their peak power shortages tend to rise. Besides, a few states including Maharashtra and Tamil Nadu are signing new short-term power purchase agreements with private power units to tide over the crisis. Central to the plan is allowing  pass-through of fuel costs by imported coal-based units, including some under the insolvency resolution process. The Centre also asked power producers owned by it namely NTPC and DVC and even state-sector generating stations to resort to a fuel mix with 10% imported coal – as against of 4% now – to boost generation. These state-run gencos may also be given the facility to recoup at least part of the inflated fuel costs via tariff increases, sources said.      

The moves come as power shortage in the country recently crossed the threshold of 100 million units (MU) a day and is threatening to rise to more precarious levels. Out of 173 pit head/non pit-head power plants in the country, 81 were operating with coal stocks of less than 7 days, on April 18. This means their fuel stocks are barely 25% of the normative requirement.

The combined capacity of imported coal-based (ICB) power plants in the country is 20,296 MW, but of this 3,566 MW is not operational due to paucity of coal and projects been admitted to the National Company Law Appellate Tribunal. Even among the operational ICB units, average plant load factor was just 26.2% in March. The tariff increases are believed to encourage these units to produce much more electricity than now, and many may approach  their optimum capacity utilisation levels, the sources added.

According to Rahul Raizada, executive director at PwC India, ICB units’ PLF might rise to at least 50%, as they are allowed pass-through of higher fuel costs “Given the peak shortage in majority of the states, it is likely at least 16,000 MW operational capacity of ICBs may get fully utilised if the coal situation persists,” Raizada said.

As against a level of $50-60 per tonne a year ago, cost of imported coal ruled at around $160 per tonne in January ; it  has since surged further to the current level of about $250/tonne. Indian ICB power plants import coal mainly from Indonesia, Australia, and South Africa. Analysts say given the Russia-Ukraine crisis, imported coal prices will remain elevated at around $180-200/tonne over the next 8-12 months.    

Sources in the Gujarat’s energy department said that Essar Power Gujarat would be allowed pass through of entire fuel costs until December 2022 if the imported coal prices remained above the pre-Covid level.

A source from the Tamil Nadu Electricity Board (TNEB) said ICB plants in the state have been allowed to supply power as per the contract-provided escalation (of fuel costs). “We have just signed an agreement with one of these units for short-term supplies where tariffs are discovered via bidding,” the source said. He said that the tariff increase will be allowed for any rise in landed cost of imported coal from the threshold of $120/tonne.

Daily power consumption in Tamil Nadu has been increasing from 300 million units (MU) last month to 320 MU now,  and by April end, it may cross 390 MU.“We are currently able to meet the peak demand. Wind power production is also being stepped up. We are confident of averting a serious power crisis,” he said.According to Dinesh Waghmare, principal energy secretary at Maharashtra government, the state has already tied up for 650 MW of power with Coastal Gujarat Power, an ICB unit of Tata Power at Rs 5.1-5.2 per unit. Supply of another 100 MW with the firm would be tied up shortly, he added.

Maharashtra, the most industrialised state, is currently facing a peak power shortage of around 2500 MW and is looking at options to tie up with more power plants. “We are also in talks with NTPC’s Ratnagiri unit to source additional power,” Waghmare said, adding that the tariff in this case will factor in variable cost of fuel Rs 6-7/unit.

However, the secretary said, the companies will have to file a petition with the state electricity regulator for the increase in power tariffs.

Separately, Mahagenco, the state power generator, has placed an order for 0.4 million metric tonne of imported coal for blending with domestic coal.Meanwhile, power shortage touched a high of 26.13 mu in Andhra Pradesh on April 12, while in Madhya Pradesh the deficit was 17.61 mu. Maharashtra (15.39 mu), Punjab (6.38 mu) and Haryana (6.51 mu) are also facing big power deficits.

B. Sridhar, energy secretary of Andhra Pradesh told FE last week, that “The power produced from imported coal would still be cheaper than the electricity sold on the exchanges. The spot prices on Indian Energy Exchange rose to a high of Rs 18 per unit before IEX capped the price at Rs 12/- to prevent Independent power producers to make windfall gains from the crisis.
The Uttar Pradesh government is learnt to have given in-principal approval to all gencos in the state –   state-owned as well as private producers – to step up coal imports and ensure adequate fuel stocks during the summer.  According to sources in the UPPCL, the difference in price between domestic and imported coal may be allowed as pass-through if the imported fuel remained costlier.

Also, in a recent communication to the gencos, the Uttar Pradesh Power Corporation (UPPCL) has reiterated that the procurement of coal must be done through a transparent, competitive process so as to identify a reasonable market price, which should then be sent to UPPCL for approval.

Earlier,  the UP’s state-run genco Uttar Pradesh Rajya Vidyut Utpadan Niga, which runs five units and has a total capacity of 4500 MW, invited competitive bids for the purchase of 2.25 million tonne of imported coal, but state  power regulator Monday stalled it. The regulator sought clarification on whether imported coal, which has high gross calorific value, can  be used in UPRVUN plants, as most of the plants have old and depreciated units.

Maharashtra power minister Nitin Raut said on Tuesday: “The state government has issued tenders to import 0.1 million tonnes of coal. Coal shortage is also due to lack of rakes (trains). We require 37 rakes per day, while we get only 26. Each rake can transport 4,000 metric tonnes of coal.”  Sources said that Mahagenco is placing orders for another 2 million tonnes of coal for which negotiations were in progress.

The Maharashtra Electricity Regulatory Commission (MERC) meanwhile, has allowed four power utility firms to apply for quarterly fuel adjustment charges (FAC) in bills. This means the bills of consumers residing in Mumbai could go up by 3-10%. FAC is a variable charge that utilities apply on bills based on the varying price of fuel or coal. This amount was not billed to consumers for the past two years during the Covid19 pandemic. The MERC has written to BEST, Adani Electricity, and MSEDCL, giving them the option to apply for levying FAC for every quarter, for increase in fuel costs due to shortage of domestic coal.

(With inputs from Nayan Dave in Ahmedabad and Nanda Kasabe in Pune)