Coal price rise to up power generation cost by 10ps

The Dollar Business Bureau

The recent hike in coal prices may lead to a rise by 10 paise in the cost of generation for coal-based power plants, revealed ICRA, a domestic credit rating agency. The price hike of coal announced by state-owned Coal India Ltd may result in slight increase in the cost of power purchased by distribution companies, said the agency. As per the estimates of ICRA, the cost of thermal power generation will increase by 9-10paise, said Sabyasachi Majumdar, Senior Vice President of the agency.

Provided that about 60% of the total power purchased by discoms is for coal-based power generators, the rise in the cost of power procurement for discoms across India may go up by 6 paise per unit. Assuming that the average AT&C loss will be around 25%, ICRA estimated the impact of a hike in the cost of power supply per unit sold and retail tariffs at around 8 paise per unit, said Majumdar.

CIL recently revised the cost of run-of-mine costs for all grades of cooking and non-cooking coal. The cost of thermal grade coal, that is supplied to the power sector, has been increased by 15-18%, which means that the generation cost might go up by 9-10 paise, said ICRA.

"Despite the hike in domestic coal prices, power generation based on domestic coal still remains the cheapest source of power supply in India," Majumdar added.