The editorial "Pooling tariffs" (June 25) rightly highlights the moral hazard in the government's decision to allow pass-through rate hikes to power companies for increased cost of imported coal. The state cannot underwrite faulty business decisions in contracts awarded through a competitive bidding process. It is unfair not just to the consumer, but also to those bidders who lost out because they had bid more responsibly. Every business decision does not come with an ironclad guarantee of being profitable. The issue has arisen principally owing to Indonesia's decision to increase coal prices. In fact, some successful bidders have acquired coal mining assets in Indonesia to be captive sources of supply. It is a moot point whether some part of the Indonesian increase does not flow back to the mining arm in Indonesia, which then makes a windfall profit, while projecting a loss on power plant operations in India.
Udaya Bose Bangalore
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number
