As power producers pass on the costs of expensive imported coal and transportation charges, households across India will see costlier electricity bills. Several states, for FY24, have already set new tariff orders.
There may be further spikes during the year due to an increase in power generation expenses. A top executive on the condition of anonymity believes the purchase of more coal, domestic and imported, and the new rail-ship—rail route will increase the net cost of power generation to around 40 paise per kilowatt hour (kWh).
He highlighted that power-generating companies already have some imported coal stocked up since 2022. The executive said domestic coal stocks at the start of 2023 were already higher than at the start of FY23, but the increase in expenses on imports may not be as high as seen in the last fiscal.
Vikram V., vice president and sector head of corporate ratings at ICRA Ltd., said for inland power projects which are not near the coast, the blending of 6 per cent imported coal in a 25-35 paisa per kWh at the generation level. He explained the blending mandate may further impact the finances of power generators. Sudhir Kumar, director of CareEdge Ratings, said the blending of imported coal would increase the variable cost of power generation. But three years ago, imported coal was around $60 per tonne, and now it’s around $140-150 per tonne, and in 2022 it touched nearly $400 per tonne.
Amrit Lal Meena, Union Coal Secretary, said in March that the cost of coal supplied by rail was Rs 4,700 per tonne, while for RSR it would be Rs 7,400. He said the ministry would have to look with a nation-as-a-whole approach. “It is a little more expensive than the cost of rail route, but since the railway network is congested if 5 – 10 per cent of the supply shortage can be plugged by way of an extra cost, that nation-as-a-whole approach is better.”