Fuel Costs Must Pass Through in Power
There is needless uncertainty over tariff revision for coastal power plants using unexpectedly dearer imported coal, when it ought to be par for the course to treat fuel as “pass-through” costs, with price bidding confined to non-fuel parameters. It is welcome that the Supreme Court has now called for a tariff review for the concerned Adani, Tata and Essar Power plants, but most unfortunate that the issue has been dragging on from 2010, following changed rules for Indonesia coal prices.
Given their parlous finances and long year of politically mandated giveaways and patronage of theft, state power utilities seem unable to compromise and duly seek revised tariffs for the competitively bid projects. Reports say the revised fuel prices are likely to be a small fraction of the total per-unit power prices for the state utilities. In any case, the revised prices are likely to be far lower than from new plants. Besides, there is ample built-in provision to duly revise and pass-through higher operational and maintenance expenses for competitively bid power projects. And yet, the issue of compensatory tariffs has not been amicably resolved. The way forward, surely, is for all stakeholders, including project developers, power procurers (read: state utilities) and consumers, to make concessions and be open to tariff revision in the normal course. We do need a proper market for power, so that more efficient producers can competitively seek custom. Further, the revised pooled price of power is likely to be more modest anyway. We do need more transparency right across the board in the power sector. Power utility finances need to be mandatorily published on a regular basis. It would also make perfect sense to have a more competitive and efficient market for the main fuel, coal.