Power tariffs will go up by at least 15-17 paise a unit shortly as the government has allowed power producers like Tata Power, Adani Power, and Reliance Power among others to pass on the cost of imported coal to the distribution companies, which in turn would be forced to recover the same from consumers. The decision comes as the government is trying to boost power generation by using imported coal as domestic coal output falls short of demand, triggering power cuts in several places. The move can help bring 78,000 mw of generation capacity which are stuck due to want of fuel supply, on-stream.
However, finance minister P Chidambaram said the tariff hike will only be marginal. "There will be small increase in power tariff. It will be very marginal increase on unit cost of power depending on the cost of import of coal,"he told reporters after a Cabinet meeting chaired by the prime minister Manmohan Singh. The decision will be implemented by July-end and changes in power rates will be reflected in tariff revisions that states may announce in due course of time. States may decide not to pass on the increase by subsidising power generation.
"There is a famous saying that no power is costlier than no power. The choice is pay more for electricity or you don't get electricity at all… It is better to have power plant working and producing power than have no power at all," the finance minister said. Chidambaram said important reform measures in the coal sector will be announced next month to help boost domestic production.
"Very large capacities stand stranded today because of lack of coal, lack of gas," Chidambaram said, adding "many power plants are stranded, producing no power. Some are producing below capacity, therefore for the interim period there is no option but to import coal, which is costlier than domestic coal.”
Stating that the Cabinet Committee on Economic Affairs decision will pave way for greater availabilty of fuel, power minister Jyotiraditya Scindia said, "as far as increase in tariff is concerned it would only be from the component which will be imported. But the availability of fuel would increase." The power sector has hailed the move to pass-through cost of imported coal as the decision is likely to help many power companies. Power producers until now are not allowed to fully pass on the cost of expensive coal imports they resorted to for meeting shortfalls from domestic mines.
The country has an installed capacity of about 212,000 mw. Coal ministry said it will implement the decision within a month.
