Expensive coal imports and logistics likely to continue the trend of high electricity prices

With electricity companies, planning to pass on the prices of expensive coal imports to customers, the trend of electricity bills price hikes in some states is expected to continue.

Notably, in light of the low availability of coal in September-October 2021 and April-May 2022, the Union power ministry had issued directions to power-generation companies to limit their use of imported coal up to 6 per cent of their total requirements until September. 

As per reports, the increased cost for companies engaged in coal production was also a result of the rail-ship-rail (RSR) arrangement for the transportation of coal from coal-producing states in the Eastern part of India to the user plants in Western India.

The expensive imports alongwith the increased transportation costs may lead to an increase of 40 paise per kilowatt hour (kWh), a senior official said.

An increase in tariffs for consumers has already been announced by some of the states. But the prices are expected to increase further, given the rise in production costs. 

The official stated above, giving some relief stated that although consumers can expect an increase in electricity prices, the increase of price may not be as big as seen in the last financial year as power companies have stocked up on imported coal since last year. A larger stock of domestic coal at the beginning of the year may also help control prices.

Government-owned 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.

To underline the difference in the cost between the coal transported through RSR and imported coal, the Union coal secretary had said in March that while coal transported through rail was Rs 4,700 per tonne, and through RSR, it was Rs 7,400 per tonne but it was still substantially lower than the cost of imported coal. The cost of imported coal is Rs 10,000-12,000 per tonne, he informed.

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