Coal India (CIL) has raised the prices of non-coking coal of various grades, inflating electricity cost by 2-4%, a development that might reflect in power tariffs soon.
Coal India (CIL) has raised the prices of non-coking coal of various grades, inflating electricity cost by 2-4%, a development that might reflect in power tariffs soon. The price of coal with gross calorific value (GCV) between 3,100 kcal/kg and 4,300 kcal/kg, which the power sector uses the most, has been increased by 15-18%. The move is expected to impact operational coal-based power generation capacity of 193 gigawatts (GW), nearly 60% of the installed power plants in the country. “Due to this revision, CIL will earn an incremental revenue of Rs 1,956 crore for the balance period of FY18. Projected annual incremental revenue would be Rs 6,421 crore,” CIL said. While research firm Icra said that the move will increase the cost of generation for coal-based power plants by about Rs 0.13-0.15 per unit, Kameswara Rao, partner at PwC, estimated the impact at Rs 0.06-0.10 per unit. Ashok Khurana, director general, Association of Power Producers, said that generation cost would increase by Rs 0.30-0.35 per unit.
Unless tariff revisions are prompt, CIL’s decision may also reverse the benefits that discoms were beginning to reap from the Ujwal Discom Assurance Yojana (UDAY) scheme. Discoms are expected to report better financial performance in FY17, mainly through lower interest costs, thanks to prudent debt restructuring under UDAY. However, since tariff revision is a complex process, it would take some time for discoms to pass on the coal price hike to the consumers, hurting their cash flows.
Cost of generation for thermal power projects has been affected by rising fuel costs, higher environmental cess and significant increase in capital costs for recently commissioned and under-construction coal-based power projects. This is reflected by the fact that power producers have been mostly quoting tariffs of more than `4 per unit in competitive biddings over the last three to four years. The national average power purchase cost determined by the Central Electricity Regulatory Commission for FY18 is Rs 3.48 per unit. “Consumers cannot continue bearing arbitrary price increases by the monopoly coal supplier. Coal regulator is an imperative to bring transparency and predictability in price fixation,” Khurana added.
Power consumers are already bracing for an anticipated power tariff rise stemming from power plants’ requirement to meet revised environmental norms, which is expected to raise prices by between Rs 0.62 and Rs 0.93 a unit. CIL would also gain more from e-auctions of coal, where it usually sells the fuel at a 40% premium over the notified price. The additional Rs 50-per-tonne evacuation charge levied by CIL from December 2017 was expected to fetch the coal monopoly Rs 800 crore for the remaining tenure of FY18. Additionally, a coal cess was introduced at Rs 50 per tonne in 2010, which was subsequently increased to Rs 100 per tonne in 2014, Rs 200 per tonne in 2015 and further to Rs 400 per tonne from 2016. According to analysts in CARE Ratings, the latest coal price rise would compensate for the Rs 5,667-crore wage hike agreement.