Pricier coal leading to lower margins, say thermal power producers

Coal-based power producers are in a fix as the rising costs of coal have lowered margins while they await consent from the electricity regulators to pass on the costs in the tariffs.

Executives at a private power producer told BusinessLine , “We have been seeking consent from the regulators for over six months to pass on the hit from the escalated coal handling charges.”

“This is a double whammy for us, while keeping in mind the depressed price of power in the country,” he added.

According to industry watchers, there are delays of up to two years in some cases where the higher input costs are disallowed and tariffs kept unchanged. But the delayed pass through is just the tip of the iceberg.

Thermal power plants are also struggling because the methodology for calculating the input cost increase masks the higher price of thermal, coal according to Director General at the Association of Power Producers, Ashok Khurana.

Under recoveries

He said, “Faulty coal escalation index of the Central Electricity Regulatory Commission has led to huge under recoveries of energy costs and it is increasing progressively.”

For example, the price increase of coal of Grade 11, mostly used by the power sector has increased has been 50 per cent and index provides for an escalation of only 28 per cent, Khurana explained.

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