Power cos likely to hike tariff

Power cos likely to hike tariff

'Better to have electricity and pay a few paise more' than not have power at all

Power cos likely to hike tariff

In a move that is sure to raise electricity bill for commoners, the government on Friday allowed power companies to pass on the costs of imported coal to consumers.

“It is better to have power and pay a few paise more than not have power at all. It is better to have our power plants working and producing power than keep them shut down after investing thousands of crores,” Finance Minister P Chidambaram told reporters after a cabinet meeting.

However, the power producers will have to get approval by their state governments, before passing on the enhanced power prices to consumers, which can decide to subsidise them for consumers if they wish to.

Analysts said the option may not be very viable as the price of imported coal varies between Rs 5,000 per tonne and Rs 5,500 per tonne while the coat at which Coal India sells majority of its coal is Rs 2,800 a tonne.

Power tariff will increase manifolds if the producers were to import coal and pass on the costs to consumers, they said.

Chidambaram said, the government has initiated measures to augment production and by first week of July certain other decisions will be taken to open up more coal mines and to produce more coal but in the meanwhile coal imports were necessary.  "In the interim period, there is no option but to import some coal,” he said.

 The minister also said that cost of power will not be uniform. It will depend upon power plant to power plant and where it is located. Half of India’s energy demand is fulfilled by coal power for which 80 per cent of coal comes from Coal India.

Government also said that power producers can either import directly or through state-run firms like Coal India and MMTC Ltd. Although it is too early to work out the cost of imported coal but a power ministry official said that one per cent increase in import of coal by Coal India is expected to increase the tariff by one rupee or more.