Coal pricing formula caused ~8,400 crore under-recovery

Private independent power producers, which are cumulatively running coal-fired units of 12,000 megawatt (Mw), have expressed concern over the pricing formula used for coal and transportation cost. The companies, through their representative association, have informed the Ministry of Power that they are facing an under-recovery of ~8,400 crore and the indices to formulate coal prices should be revised.

Coal India decides the price of various grades of coal through the Wholesale Price Index-based inflation data, shared by the commerce ministry monthly.

The power producers are now asking for a separate index for deciding the price of coal and its transportation, because, they are claiming, they pay more than what the indices work out.

The cost of coal comprises several elements before it lands at the power unit. These include taxes imposed by states, the cess imposed by the Centre and states, the coal terminal surcharge, the busy season surcharge, and the development surcharge during various demand seasons.

The clean energy cess is imposed to recover the cost of investment in renewable and environment projects. The tax and surcharges on transportation are done by the railways in accordance with rake availability and seasonal demand for coal and wagons for it. “The faulty coal and transportation price escalation index, where presently 49 per cent of coal costs and 21 per cent of fuel transportation costs are not covered, has been leading to underrecovery to the tune of ~8,400 crore for 12,000 Mw of installed generation capacity,” said the letter by the Association of Power Producers dated September 28.

Coal India and the ministry of coal did not respond to the query. Cases on allowing such costs as pass through are pending in several courts and regulatory bodies. The power developers have asked for passing through of these charges under “change in law”. The National Tariff Policy, 2016, has laid down that any change in cost after a project has been awarded would come under the category of “change in law” and would be allowed to be passed through in the final cost of power. However, any change in power tariffs requires approval from either the state or the Central Electricity Regulatory Commission. Power procurers challenge such moves because they escalate power rates.