Electricity bills in some states are set to rise as power-generating companies plan to pass on the cost of expensive coal imports to consumers, according to a report by Mint. The Union power ministry had previously directed power-generation companies to limit their use of imported coal to 6% of their total requirements until September, due to the low availability of coal in September-October 2021 and April-May 2022. In addition to this, transportation costs have increased due to the rail-ship-rail (RSR) arrangement for transporting coal from coal-producing states in the Eastern part of India to user plants in Western India.
An unnamed senior executive was quoted as saying that expensive imports combined with increased transportation costs may lead to an increase of 40 paise per kilowatt hour (kWh). Some states have already announced an increase in power tariffs for consumers, but further price increases are expected due to rising production costs. However, power companies have stocked up on imported coal since last year, which could mitigate the price increase. Additionally, a larger stock of domestic coal at the beginning of the year may help control prices.
The government-owned National Thermal Power Corporation (NTPC) has begun transporting coal from Paradip in Odisha to its thermal power plants in Jhajjar, Haryana, and Dadri, Uttar Pradesh, using RSR. Furthermore, NTPC’s plants in Karnataka and Unchahar in Uttar Pradesh are also likely to follow the same transport mechanism. Despite the increased costs associated with RSR transportation, it is still substantially cheaper than imported coal. According to the Union coal secretary, coal transported through rail costs Rs 4,700 per tonne, while coal transported through RSR costs Rs 7,400 per tonne. In contrast, the cost of imported coal is between Rs 10,000-12,000 per tonne.
The escalation in electricity tariffs could have momentous repercussions for consumers, particularly those who dwell in low-income households. Moreover, it could impinge on industries that heavily rely on electricity, such as manufacturing and agriculture. Besides, mounting electricity costs could fuel inflation and adversely impact the overall economy.
To tackle the mounting issue of soaring electricity prices, the administration could contemplate taking certain actions, such as endorsing the adoption of renewable energy sources, enhancing energy efficiency, and investing in domestic coal production. The government could also delve into alternate transportation mechanisms, such as pipeline transportation or coastal shipping, to alleviate transportation costs.
In conclusion, in certain states, the upsurge in electricity prices is predicted to persist due to the high cost of imported coal and augmented transportation expenses. Though electricity providers have hoarded imported coal since the preceding year, the increase in prices may not be as considerable as observed in the past fiscal year. Nevertheless, consumers, particularly those in low-income households, could bear the brunt of the escalating electricity prices. The administration could explore ways to curtail the impact of soaring electricity tariffs, such as promoting renewable energy sources and enhancing energy efficiency.
