Power plants stressed due to rising coal, freight costs
The coal-based power plants are feeling the heat of a spike in thermal grade coal prices and railway freight costs. The prices of thermal grade coal has moved up by 15-18 per cent after the last notification by Coal India on January 9 this year . Apart from this, the levy of evacuation charge of ~50 per tonne is estimated to increase the cost of generation of coal-based power plants by 13-15 paise per unit.
Also, the ministry of railways, through a notification on January 9 this year has rationalised the freight rates for coal transportation and has withdrawn the levy of busy season surcharge (15 per cent), and development surcharge (five per cent) on the transportation of coal. The busy season surcharge is levied from AprilJune and from October-March in a financial year. On an annual basis, the freight rates have been revised by 3.43.6 per cent across various distance slabs. According to a report by Icra, the affect of this freight revision for the cost of generation of thermal plants could be two to four paise per unit depending on the distance of the project from the associated coal mine.
“Thermal power plants are already
operating at a lower load due to the rising demand for renewable power. The hike in coal and railway freight costs is a blow to the operations of the coal-based units. The plants without long-term power purchase agreement (PPAs) will suffer the most”, said an industry source.
For domestic coal based IPPs (independent power producers) which have competitively bid-based PPAs, the impact on the margins will be dependent on the extent of escalable energy charge component in the tariff structure. For power generating companies and IPPs without long-term PPAs and having exposure to short-term PPAs, the profitability will be negatively impacted with rise in coal price,given the subdued short-term tariffs with the surplus generation capacity available in the country. Icra expects a partial pass-through by private IPPs with competitive bid-based PPAs for the balance coal based generation. Under these assumptions, the cost of power procurement for discoms at an all India level is estimated to increase by about nine paise per unit.
JAYAJIT DASH