Electricity users will have to brace themselves for a hike in tariffs following a 14 per cent hike in royalty paid to states on coal.

The decision to increase the royalty on coal, the main input for power generation, by an average of 14 per cent was taken by the Cabinet Committee on Economic Affairs (CCEA) on persistent demand from the coal-producing states.

“Any revision in cost will reflect in prices (at the consumer level),” Finance Minister P Chidambaram told reporters after the CCEA meeting.

Asked if he was not concerned about the impact of royalty revision on inflation, he said it was “the right of the states” to seek revision in the rates and an assurance was also given to them in Parliament.

But he admitted that the government was “still grappling with inflation.”Mr Chidambaram said the increase in revenue for the states, barring West Bengal, will be 24 per cent for coal and 27 per cent for lignite.

“The revenues of the coal-producing states would increase to Rs 3,718 crore from the current Rs 3,000 crore,” he said.

The decision to revise royalty was taken after the principles of determining rates were considered by the Economic Advisory Council (EAC) to the Prime Minister and a Study Group of the Ministry of Coal.

However, a Coal Ministry official said the impact of royalty revision on prices would be minimal.
Coal based power plants consume 70 per cent of the total coal produced in the country.