Discoms not buying high cost power

In continuation to the previous blog where we discuss the increase in subsidy for discoms and the increase in power tariff due to increase in freight costs, cess & customs duty; we now look at another aspect of discoms’ working pattern.

Coal prices have recently slumped to their 10 year low but power plants in India are not importing coal. This is despite coal shortage being faced by most power plants in India. The reason being that discoms are not willing to pay for costly power fuelled by imports.

According to Economic Times, the prices of 4,200 kcal/kg thermal coal in international markets are now around $36.50 per million tonne as against $52 per million tonne two years ago.

But this decrease in price has encouraged Indian power producers to import coal.

In 2013, the government allowed power producers to recover cost of imported coal from consumers but most state utilities are against buying expensive power. But this is not happening on the ground.

Recently, Power and coal minister Piyush Goyal told Lok Sabha that of the 54 million tonnes coal expected to be imported, power firms imported only 17 million tonnes.

So on one hand the discoms are utilising state money to stay afloat and increasing tariff upto an extent to pay for the new duties/taxes levied by the government but unable to buy expensive power because they are not able to pass the higher tariff to the consumers for reasons [political and inefficiency] pretty well known.

Unless and Until, Discoms are made to work like a company which is responsible for its profit & loss with no political interference; we may not be able to see sustainable discoms inspite of the financial restructuring.

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