PANJIM: Rising coal and gas prices could jack up electricity generation costs and erode competitiveness of the Indian industry if effective measures are not taken to check this trend, warned speakers in a power conference here on Friday.
The warning comes amid clear indications that the government could soon give the go-ahead for import-parity pricing of coal and natural gas following example of the crude oil.
V K Garg, former chairman, joint Electricity Regulatory Commission, Goa and Union Territories, suggested rationalising rail freight to bring down coal costs for power generation. Garg was addressing the 15th Regulators and Policymakers Retreat, a flagship event of Independent Power Producers Association of India (IPPAI).
Sushil Maroo, CEO, Essar Power, too supported Garg’s suggestion. He said power plants should be set up near pitheads to save on coal transportation costs. As per an estimate, 80% of country’s coal-based generation capacity is located away from coal sources. In some of these cases, coal transportation charges alone contribute more than Re 1 to electricity tariff.
The urgency for stepping up domestic coal production was also underlined by speakers in view of high costs of electricity generated from imported coal. As much as 35,000 mw generation capacity is stranded as distribution companies are reluctant to buy costly power from imported coal-based generating stations.
Asheesh Sharma, MD, Maharashtra State Power Generating Company Ltd, said, Coal India Ltd should provide the same quality of coal that it commits. He added that until this quality issue is resolved, domestic coal pricing should not be linked to international market. Mahagenco, India’s second largest power generator after NTPC, spends Rs 11,000 crore annually on coal. Sharma said Mahagenco loses Rs 2,000 crore due to lower calorific value of coal supplied by Coal India Ltd.
While electricity generation costs are going up due to high input costs, distribution companies (discoms) are unable to get cost-reflective tariff from consumers, which has resulted in heavy build-up of regulatory assets (deferred revenue by consumers to discoms). For example, combined regulatory assets of three private discoms in Delhi are estimated to have crossed Rs 27,000 crore. Gopal Saxena, director, BSES discoms, said he was worried about legal status of the regulatory assets.
Energy costs of the industry in the US, China and Europe are expected to fall in coming years due to shale gas revolution in those countries even as electricity tariff is rising at an alarming pace in India. In this context, Harry Dhaul, director generator, IPPAI, warned that over the next 5-10 years, the Indian industry could see a drastic erosion in its competiveness vis-à-vis manufacturers from these countries if effective ways are not found to cut power costs.
