Siddhartha P. Saikia

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Siddhartha P Saikia

Price pooling mantra: Wake up to expensive electricity

New Delhi | Updated on April 02, 2013 Published on April 02, 2013

‘Pool pricing’ is the new buzz word around Ministry corridors in the national capital. The mechanism for coal has been already ‘in-principle’ approved by Cabinet, while for gas it’s yet to get the fire.

The fancy methodology of pooling price of fuel across all users may be a boon to corporate houses, whose plants are starving for coal or gas. Also, it will be a relief to the financers who are on the verge of reporting non-functional power stations as non-performing assets.

But, what you and me getting from pool pricing? Will it offer electricity at cheaper rates? The answer is probably ‘No’.

In real, pool-pricing can raise tariffs, hurting consumers but would be a boon for project developers and financers.

Take the gas-fired units: Pooled gas (65 per cent of domestic gas and 35 per cent imported) may result in fuel price of $ 12 per mBtu. If gas of this price is used to generate electricity, each kWh would cost around Rs 6, excluding transmission charges and local levies.

Similar is the case for coal. This model is proposed to keep the price of imported coal at the same level of indigenous output and every coal buyers paying a higher price. And this may end up increasing the price of coal available in the country by anything between 8 per cent and 21 per cent, which will impact the generation cost.

Take the example of NTPC, the largest thermal power generator. The public sector firm sources most of its coal domestically and imports some. It is able to sell power at much less than Rs 5 a unit.

International price of fuels – coal and gas – fluctuates and mostly move northwards than reducing.

There is very unfortunate but true that electricity tariffs would not drop and rather pool-pricing will push it further up.

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Published on April 02, 2013
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