Expensive coal imports, logistics may result in higher electricity bills

An unnamed senior executive said that expensive imports combined with increased transportation costs may lead to an increase of 40 paise per kilowatt hour (kWh)

The trend of electricity bills price hikes in some states is expected to continue as electricity-producing companies plan to pass on the prices of expensive coal imports, Mint has reported.

Notably, in light of the low availability of coal in September-October 2021 and April-May 2022, the Union power ministry had issued directions to power-generation companies to limit their use of imported coal up to 6 per cent of their total requirements until September. 

In addition to this, the rail-ship-rail (RSR) arrangement for the transportation of coal from coal-producing states in the Eastern part of India to the user plants in Western India has resulted in increased costs for companies engaged in coal production, the report added.

 

An unnamed senior executive was quoted in the report as saying that expensive imports combined with increased transportation costs may lead to an increase of 40 paise per kilowatt hour (kWh).

Some states have already announced an increase in power tariffs for consumers. However, a further price increase is expected, given the rise in production costs. 

However, to add some relief, the official quoted above clarified that since power companies have stocked up on imported coal since last year, the price increase may not be as big as seen in the last financial year. A larger stock of domestic coal at the beginning of the year may also help control prices.

Government-owned NTPC has begun transporting coal from Paradip in Odisha to its thermal power plants in Jhajjar, Haryana and Dadri, Uttar Pradesh, using RSR. Furthermore, NTPC's plants in Karnataka and Unchahar in Uttar Pradesh are also likely to follow the same transport mechanism.

To underline the difference in the cost between the coal transported through RSR and imported coal, the Union coal secretary had said in March that while coal transported through rail was Rs 4,700 per tonne, and through RSR, it was Rs 7,400 per tonne but it was still substantially lower than the cost of imported coal. The cost of imported coal is Rs 10,000-12,000 per tonne, he informed.