BackNTPC plans to reduce average tariff to under `3 per unit
Plan comes in backdrop of the state discoms displaying a reluctance to buy power, which is affecting NTPC revenue
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New Delhi: In what may lead to a reduction in the electricity bills of some consumers, the state-owned NTPC Ltd has undertaken an exercise to keep the tariff of power generated across its various projects to an average level of under ₹ 3 a unit. In addition, NTPC wants to supply power at a uniform rate across the country.
The plan to reduce the average tariff comes in the backdrop of state electricity boards (SEBs), buyers of the power generated by the corporation, increasingly displaying a reluctance to do so on account of their poor health, impacting NTPC’s revenue.
“The plan is to bring down the average power tariff to under ₹ 3 a unit and provide a uniform tariff across the country from all fuel sources. Also, if we sell power to the states at ₹ 3 a unit, they will have to provide it to their consumers at a similar rate," said an NTPC executive, requesting anonymity.
In the last financial year, the average rate of electricity sold by NTPC’s coal-fuelled projects was ₹ 3.25 per unit while the tariff of power from its other projects ranged between ₹ 2 and ₹ 4.50 a unit. With an installed capacity of 44,598 megawatts (MW), NTPC has a 17% share of India’s power generation capacity of 267,637 MW and has set itself a target of becoming a 128,000 MW power producer by 2032.
Another NTPC executive, who too did not want to be identified, confirmed the strategy.
According to him, the utility plans to supply electricity from its coal-pit head plants at an average rate of ₹ 2.95 per unit, at a plant load factor (PLF) of 92%.
PLF is a measurement of average capacity utilization.
While most experts welcomed the move, some expressed concerns about the plan. “Pooling of their power and tariffs across assets is a good idea, but the question is whether states and distribution companies that are getting power at lower tariffs will agree to any hike in electricity costs from NTPC," said former power secretary P. Umashankar.
“It is an interesting move by the NTPC that can drive down the cost of power to state distribution companies and reduce their average net loss. It will also increase their propensity to buy more power, which has tapered recently due to poor financial health. In my mind, most discoms would like to absorb the benefits instead of passing them on to the consumers, unless prodded through political intervention," said Abhishek Poddar, a partner at AT Kearney Ltd, a consultancy.
A power sector analyst, requesting anonymity, said, “On average, NTPC’s projects will be in the merit order of dispatch in all the states where they are supplying power. However, there will be some new stations which are not at coal pitheads and so have a cost of generation that could be higher than ₹ 4 a unit. They will not figure in the merit order of states. By this exercise, they are ensuring that their capacity utilization increases."
NTPC’s worries primarily stem from the revised electricity tariff norms.
Last year, power sector regulator Central Electricity Regulatory Commission (CERC) rejected its representation to revisit power tariff norms applicable between 2014-15 and 2018-19. CERC’s earlier order had said incentives would be based on the PLF metric and not plant availability factor (PAF). While PLF is based on the actual power generated by a plant, PAF is a measure of the available generation capacity.
In essence, the CERC linked future financial incentives to the purchase of power by distribution companies. Since these utilities are always cash-strapped, PLF is almost lower than PAF—putting in jeopardy NTPC’s revenues.
In 2014-15, NTPC posted a 17% decline in its second-quarter profit, at ₹ 2,071.63 crore. Revenue increased by only 1%, to ₹ 17,267.32 crore, from a year ago. In the third quarter ended 31 December 2014, revenue fell to ₹ 19,339.37 crore from ₹ 19,589.01 crore in the year-ago period. Net profit rose 7% from a year earlier to ₹ 3,074 crore. NTPC’s PLF for coal-fuelled projects was 81.5% in 2013-14, compared with 83.08% in the preceding year.
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