Decision on pass on imported coal costs to ease pressure of power utilities

Decision on pass on imported coal costs to ease pressure of power utilitiesIn India, nearly two-third of the electricity demand is being met through coal-based power plants. The power companies are going through a tough time to ensure adequate availability of coal for their plants as the import of coal is getting dearer. According to the CEA, in 2012-13, shortage of coal resulted the loss of 12.25 billion units or 11.5 per cent of total generation loss.Recently, on a landmark decision, the Cabinet Committee on Economic Affairs (CCEA) has allowed the power companies to pass on imported coal costs to their consumers. Though opposition parties have criticised the government for probable increase in power tariff, the power utilities have all the reasons to rejoice. A time when the sourcing of coal at an affordable price has become a challenge, the decision of the government to allow cost pass-through of imported coal comes as a great breather! Given the abysmal power tariffs and deteriorating financial health of distribution companies, the step taken by the government is much awaited and appreciated by many.The move will allow power plants that are commissioned between 2009 and 2015 to import coal for any shortfall in supply from the Coal India Ltd. (CIL). The utilities will be allowed to pass on the increase in fuel cost to distribution companies.Taking the overall domestic availability and actual requirements into account, the CCEA proposed that the fuel-supply agreements (FSAs) to be signed for domestic coal quantity of 65 per cent, 65 per cent, 67 per cent and 75 per cent of annual contracted quantity (ACQ) for the remaining 4 years of the 12th Five-Year Plan.However, the tricky point is that CCEA’s proposal will cover those power utilities that have signed FSAs with CIL. Therefore, concerns of the companies, which are fully dependent on imported coal, remain unheard.Please do send me your comments at editor@enpreview.com