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Coal imports may lead to hike in power tariff

Devalued rupee pushes up the cost of thermal power generation

The plummeting rupee has already begun to show its debilitating impact on the economy. Petrol and diesel prices have gone up bringing along ominous forebodings for the people, of rise in prices of virtually all commodities.

A delayed blow, however, is in waiting for all the power consumers, to be served next year. Power tariff, in all probability, is set to go up tremendously owing to the devalued rupee and the resultant financial burden due to coal imports for thermal power generation.

Earlier, imported coal price would form an integral part of the Fuel Surcharge Adjustment (FSA), which was nothing but the deferred uniform tariff per unit payable across the board on electricity consumption. FSA constituted the unforeseen exigencies, and unplanned expenditure which could not be factored into the tariffs proposals by discoms at the beginning of the financial year.

All fluctuations in the prices of imported coal would be accordingly accommodated in the FSA to be calculated for every quarter, and charged in the subsequent quarters.

Hefty FSAs

For nearly two years, the consumers have been reeling under the burden of hefty FSAs of two previous quarters being simultaneously charged in their monthly bills. Increasing their agony is the steeply raised power tariff for the current year, which the discoms hoped, would subsume all the unforeseen costs, thereby precluding the need of FSA.

The State Electricity Regulatory Commission has recently scrapped the Fuel Surcharge Adjustment being charged quarter on quarter, and given orders so that the whole burden for the year could be included in the next year’s tariff.

With rupee on the downslide like never before during recent times, coal imports are set to cost more, thereby making thermal power production more expensive than before. However, with power generation units already stacking up imported coal to face the monsoon crisis, the devalued rupee might not hit them immediately. But in due course of time, they too will have to face the heat, experts say.

“According to the provisions of the Power Purchase Agreements we entered into with various private producers, we will have to allow for the cost escalation when fixing the price per unit. If the cost of coal imports hit the power generating companies, we will have to pay more, and propose to transfer the burden on to the consumers through tariff hikes,” says a highly placed official from CPDCL.

Source: The Hindu