State power generator NTPC reported 8 per cent (year-on-year) rise in revenue to ₹19,398 crore in the September 2016 quarter. This boosted the company’s operating profit, too.

The improvement was achieved despite muted growth in power generation and sales. NTPC produced about 61 billion units of electricity in the September 2016 quarter, nearly unchanged from the year-ago period.

What helped

Recovery of fixed costs on the company’s new power plants from consumers (State power-distribution utilities) bumped up revenue. NTPC’s power projects earn regulated tariffs that enable complete cost-recovery, plus a pre-tax return on equity of 15.5 per cent.

The tariffs set by power-sector regulator Central Electricity Regulatory Commission, allow the company to recover both the variable (fuel) and the fixed cost of its operational plants from its consumers.

In fact, once a plant is ready for power generation, even if the State power distribution utilities do not purchase power, they have to pay for the fixed cost of the plant.

Also, greater reliance on domestic, instead of imported coal, and cost rationalisation measures such as sourcing coal from the nearest mines, helped on the fuel cost front.

This enabled NTPC to bring down its overall fuel cost despite the price increase by Coal India, doubling of the Clean Environment Cess on coal to ₹400 per tonne, and the hike in railway freight rates.

Ergo, NTPC posted 31 per cent (year-on-year) jump in operating profit to ₹5,396 crore during the quarter.

However, hurt by higher tax expense, the company’s net profit declined 18 per cent to ₹2,496 crore.

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