In an effort to boost power generation and unlock investments in idling plants, the Cabinet Committee on Economic Affairs (CCEA) approved on Friday a proposal to allow companies to pass on the higher cost of imported coal to buyers. Consequently, power tariff could rise.

Preliminary estimates put the hike at 15 to 17 paise a unit, but according to the government and power producers exact calculations are yet to be made and it would depend on case-to-case basis.

This initiative is likely to ignite nearly 38,000 MW of new capacity that has either been put on hold or stalled due uncertainty over the issue of bearing the additional cost of imported coal. A total of 78,000 MW of capacity, post 2009, will stand impacted by the CCEA decision.

Power sector players hailed the decision. Associated Power Producers (APP) director-general Ashok Khurana said their two years of hard work had finally paid off. “We are very happy,’’ he said.

Talking to journalists, Finance Minister P. Chidambaram said, “There will be a small increase in power tariff. It will be a very marginal increase on unit cost of power depending upon the cost of import of coal.”

Independent Power Producers (IPPs) could import coal themselves. Otherwise Coal India Limited (CIL) would do the job . “This additional price which we pay for imported coal, obviously, has to be passed through in the power tariff. It is better to have power and pay a few paise more or not have power at all. It is better to have our power plants working and producing power or keep them shut down after investing thousands of crores. For every MW today, I think the capital cost is between Rs. 5-6 crore,” he said.

More coal mines

Interestingly, Mr. Chidambaram indicated that by July first week certain other decisions will be taken to open more coal mines. “In the interim period, there is no option but to import some coal. Imported coal is costlier than domestic coal. We are guaranteeing 65 per cent this year to 75 per cent by the end of 12th Plan by CIL for the 78,000 MW capacity,” he said.

Significant power capacities stood stranded due to lack of coal and gas. “We can't today estimate what will be the increase in cost of power and certainly it will not be uniform. It will depend upon power plant to power plant and where it is located,” he said.

Coal Minister Sriprakash Jaiswal said the Cabinet decision would not affect the signing of fuel supply agreements (FSAs) by CIL with producers.

Earlier, the government buried a proposal to pool the prices of imported and domestic coal to make the fuel affordable to new plants, owing to sharp opposition to the scheme from some big States. The government also issued a Presidential Directive to CIL to sign FSAs with producers assuring them of at least 80 per cent of the committed coal delivery.

So far, 62 FSAs had been executed. Of the 69 plants that are yet to enter into fuel supply pacts with CIL, 29 cases belong to NTPC Ltd., and its joint ventures.

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