Electricity tariffs may go up by 11 paise per unit: ICRA

New Delhi: Electricity tariffs may go up by 11 paise per unit due to an increase in coal prices by state-owned Coal India Ltd (CIL), rating agency ICRA said on Tuesday.

This expected increase in power tariffs is fuelled by CIL revising coal prices by around 15-18% effective from Tuesday midnight.

“This along with the levy of evacuation charges of Rs50 per MT is estimated to increase the cost of generation for coal-based power plants by about 13-15 paise/unit, as per ICRA estimates,” the agency said in a statement.

Of India’s installed power generation capacity of 330,860.58 megawatt (MW), 58% or 192,971.50 MW is fuelled by coal.

This fuel price increase comes at a time when utilities recorded a high quarterly generation in the three months ended 31 December, indicating a recovery in electricity demand. Any fresh demand for electricity, the absence of which is weighing down the entire power sector, will also help in resolving the stressed assets problem and improve the sector’s financial viability.

“Given that coal based generators with an automatic pass through of fuel costs account for about 60% of the total power procured by discoms and assuming a partial pass-through by other IPPs (independent power producers) with competitively bid PPAs which account for balance, this translates into about 9 paise per unit increase in power procurement cost for discoms on an all India basis,” said Sabyasachi Majumdar, group head and senior vice president, ICRA Ratings in a statement.

“In turn, assuming the average AT&C (aggregate technical and commercial) loss level at around 23% in the country, we estimate the impact on cost of power supply per unit sold and retail tariffs (assuming full pass through by state regulators) at around 11 paisa per unit or about 2% tariff hike,” Majumdar added.

This comes in the backdrop of an uncertain outlook for the power sector and the National Democratic Alliance government trying to revive electricity demand in the country.