Electricity may get costlier due to rise in coal prices

KOLKATA: Electricity may get costlier by 10 to 13 paise per unit after Coal India (CIL) increased prices on Sunday.
The price of coal grades consumed by the power sector — G8 to G13 — have been increased 13.4% to 18.75%. The development comes when stockyards of power plants and pitheads of Coal India subsidiaries are full to the brim with coal, leading to a reduction in sales.

Officials from NTPC said preliminary estimates suggest a 10 to 13 paise per unit rise in the cost of producing electricity at its plants.

Prices were increased for some grades of coal and lowered for other grades. The changes will result in additional revenue of an estimated Rs 3,900 crore every year.

This amount will help the company as it gears up for another round of wage negotiations with worker unions, which have demanded a 50% increase in gross salary.

CIL officials estimate an almost Rs 5,000 crore increase on account of the wage revision, the bulk of which will be taken care of by higher coal prices. At present, labour accounts for almost 50% of production costs.

“Considering the hikes in price including royalty and taxes, the variable part of the energy generation cost is expected to rise by around 9%,” said Sabyasachi Majumdar, senior vice president at ICRA Ratings.

“Any hike in power tariff is detrimental to the government’s mission of providing affordable electricity to every household,” said Subhasri Chaudhuri, secretary general of the Coal Consumers’ Association of India.

She said that over the past six months, coal consumers had been affected by a hike in royalty from 14% to 18.5% and a hike in clean energy cess from Rs 200 per tonne to Rs 400 per tonne. Costs have risen even as demand for CIL’s produce remains low and imported coal prices have declined sharply.

“Keeping in view the ensuing linkage auction, which itself would indicate a reflection of the market-acceptable price, and inroads of imported coal and pet coke, the prevailing 35% mark-up for non-regulated sector has been reduced to 20%,” a CIL official said.

“As a result of changes in prices, the difference of price between power and nonpower sector has been reduced from around 35% to about 20%,” said Chaudhuri.

CIL clarified that the prevailing add-on of 20% over the notified price for the regulated sector in the case of Western Coalfields is being continued. Also, to arrest the revenue loss of Eastern Coalfields due to asharp fall in the price of higher grades of coal, the company has revised the prevailing add-on of Rs 390 per tonne in the output of Rajmahal mines to Rs 450 per tonne.

According to CIL officials, even after such revisions, the price of lower grades of coal will still be 30% to 40% cheaper than imported coal of similar calorific value.