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Cost of electricity is set to rise as fuel prices take a leap

Cost of electricity is set to rise as fuel prices take a leap
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First Published: Mon, Feb 04 2008. 10 58 PM IST
Updated: Mon, Feb 04 2008. 10 58 PM IST
Ahmedabad: The cost of electricity in Gujarat, a key industrial state in India, is set to go up as the rising prices of liquefied natural gas (LNG) and imported coal are putting pressure on the finances of state electricity board Gujarat Urja Vikas Nigam Ltd (GUVNL).
The board plans to move the Gujarat Electricity Regulatory Commission, the power sector regulator, to raise the tariff. As per some estimates, GUVNL stands to lose at least Rs500 crore in the last quarter of fiscal 2008, January-March, on account of higher LNG prices.
“The average cost of natural gas bought by power generating companies in the state last year was around $10 (Rs340) per million British thermal unit (mBtu) equivalent and this has gone up to $18.7 per mBtu,” said a senior official of GUVNL, based in Baroda, who did not want to be named. An mBtu is a measure of heat energy produced by a single unit of natural gas. This means the basic cost of natural gas for power has gone up by $8.7 per mBtu.
“Add to this, $1.125 per mBtu of value-added tax, and total rise in natural gas has moved up by $9.825 per mBtu,” said the official.
The price of imported coal, ruling at around $70 per tonne last year, has risen to over $90 per tonne now. According to Dipesh Dipu of PricewaterhouseCoopers (PwC), a professional services firm, the rise in the cost of coal translates into an additional burden of 15-20 paise per unit to the power generating company, depending on the transportation cost and place of delivery.
The rise in power cost is expected to be borne by the industry and residential units and it is unlikely that the government would raise the cost of power to the agriculture sector. “Historically, any rise in power is passed on to the non-agricultural sector,” said an Ahmedabad-based entrepreneur engaged in pharmaceutical business. The rise will have an impact on the investments in the state. Investments worth Rs1.52 trillion were in the pipeline in the state as of March 2007.
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First Published: Mon, Feb 04 2008. 10 58 PM IST
More Topics: Electricity | Fuel | GUVNL | LNG | PwC |