The Ministry of Power has agreed to reconsider the calculation of power tariff set by a committee for imported coal-based power units, which the ministry is trying to get re-started to supplement power supply in the country amid a looming shortage.
Moneycontrol reported exclusively on May 18 that imported coal-based power producers have made representation to the government to revisit the tariff set by the committee, citing that it will not be feasible to generate power at these levels given the elevated price of coal in the international market. Around 8,000 megawatts (MW) of imported coal-based power plants are currently shut, as operations became unviable due to high coal prices.
“The minister, senior officials at the ministry and CEA heard the request of the companies today. There is an in-principle agreement that they will re-look at the calculation of the benchmark tariff and take action,” a senior official from one of the companies said.
Another senior power sector official said that the companies highlighted to the ministry that certain grades of international coal, which help get higher output, would be unaffordable at the benchmark tariff set by the committee.
As power demand continues to soar even as power generators scramble for fuel, the government has asked all imported coal-based power units to run at full capacity by invoking Section 11 of the Electricity Act. The Ministry of Power set up a committee, which will include representatives of the ministry, Central Electricity Authority and Central Electricity Regulatory Commission, to work out the rate at which power will be supplied from these units to power distribution companies (discoms) that have a power purchase agreement (PPA) with them.
The committee has recommended a variable tariff of Rs 6 to a little over Rs 7 for these units. These units are run by private producers like Tata Power, Essar Power, JSW Energy and IL&FS.
Tata Power Company has already moved to the Central Electricity Regulatory Commission (CERC), asking for a higher tariff than the one set by the committee and had a hearing on the matter on May 17.
“A government committee cannot determine the power tarif; this tariff won’t have any locus standi. It is a regulatory matter and should have been done by CERC. The other issue is that the report on how the calculation has been done, which grade of coal has been considered for cost, has not been made public,” another senior power sector player said, on condition of anonymity.
The government has also allowed these power generation units to sell surplus power on power exchanges in case the PPA holder discom or discoms don’t buy power. But the day-ahead market (DAM) and the real-time market (RTM) have both seen significant corrections in prices in May after supply constraints pushed prices up in March-April. In the week ended May 15, the average price in the DAM market was Rs 5.41/unit while the average RTM price was Rs 4.63 per unit. The exchange average prices were around Rs 10.38 per unit just 10 days ago.
India’s imported coal-based generation capacity is around 17,600 megawatts (MW). But the power purchase agreements for such plants do not allow for passing on the entire increase in international coal price, forcing them to either shut plants or run them at low capacity to minimise or avoid losses.
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