Amid signs of Coal India Limited (CIL) reviewing its recently announced coal pricing mechanism, country's leading power producer and state-run NTPC on Monday warned of a considerable escalation in power generation cost. This could trigger a hike in power tariffper cent under the new regime.

The new pricing mechanism of CIL has come under sharp criticism from various quarters including private players. ``The power generation cost of NTPC could go up by about 40 per cent on account of the new pricing system,'' NTPC chairman and managing director, Arup Roy Chaudhary told reporters on the sidelines of the India Energy Conclave here.

Public and private sector power producers have strongly opposed the new pricing mechanism of CIL implemented from January 1. The mechanism is based on the gross calorific value (GCV) of coal, saying this has increased prices of certain grades by up to 179 per cent. Till December 31, 2011, CIL followed a pricing mechanism based on the Useful Heat Value (UHV) of coal, which deducted ash and moisture content from the standard formula.

However, unlike the UHV pricing methodology, in which coal was categorised into seven grades, the GCV-based system has 17 grades and the new prices have been fixed accordingly. Responding to the concerns of the power producers, the Coal Ministry has asked CIL to correct prices and rationalise them.

Mr. Chaudhary said expects to sign a Joint Venture agreement for the 1,320 MW Khulna power project in Bangladesh by the end of this month. ``The project would be a 50:50 JV between NTPC and the Bangladesh government. We expect to sign the JV agreement for Bangladesh project by January 29,'' he said. NTPC and Bangladesh Power Development Board ((BPDB) had signed a memorandum of understanding (MoU) in August last year to establish two thermal power projects at Chittagong and Khulna for mitigating the power shortages in the neighbouring nation. The power plants are likely to come up at an investment of around Rs. 13,200 crore.

About the 500 MW project in Sri Lanka, Mr. Chaudhury said the financial closure for the same is expected to be achieved by September this year. The construction of the project is likely to start by April next year.

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