KOLKATA: West Bengal’s state-owned power utility has sought to raise tariffs by 9 paise a unit on account of the railways’ recent 20% increase in coal carriage charges, according to officials in the state’s power department, who did not want to be named.
West Bengal State Electricity Distribution Co. Ltd’s sent its tariff proposals for 2012-13 and 2013-14 on Wednesday to the state electricity regulatory commission for approval.
It has budgeted for a Rs.180 crore increase in power procurement costs in this financial year because of the higher freight rates, and expects its sales in the year to rise by 10% to 20 billion units.
The cost of generating thermal power is estimated to rise by at least 10 paise per unit, or one kilowatt-hour, across India because of the increase in coal carriage charges, according to consulting and audit firm Ernst and Young.
Assuming total annual generation in India will reach 600 billion units this fiscal year, the cost of producing power is set to rise by Rs.4,000 crore because of the revised freight
charges, estimates the Association of Power Producers (APP), a lobby group.
This amount is to be realized either from consumers or from state governments that subsidise power tariff.
Dinesh Trivedi, who was ousted by his Trinamool Congress party as railway minister for raising passenger fares, introduced the revised freight rates eight days before presenting the rail budget.
The new tariff structure was announced on and made effective from 6 March—the day election results were announced in five states—so that it didn’t receive much media attention, according to railways officials, who did not want to be identified.
The West Bengal power utility has petitioned the regulator for an average tariff of Rs.5.87 a unit for 2012-13, up from Rs.5.78 until 31 March.
The utility and the state-owned generating firm West Bengal Power Development Corp. Ltd are widely regarded as one of the most efficient in India because of their profitability and low transmission and distribution loss.
The utility buys power from West Bengal Power Development Corp. and other power producers under long-term purchase agreements.
CESC Ltd, a private utility that produces and distributes power in Kolkata and its suburbs, is still assessing the impact of the change in the railways’ coal carriage charges. “A figure hasn’t emerged yet,” managing director Sumantra Banerjee said.
The impact will be minimum for power plants in eastern India—chiefly in West Bengal, Orissa, Bihar and Jharkhand—because of their proximity to coal mines, according to Abhaya Agarwal, executive director at Ernst and Young. The cost of production, according to Agarwal, is set to rise by 10-20 paise per unit across India depending on the distance between mines and power plants. Those located at pitheads, however, will not be affected at all, he added.
APP estimates generation cost will increase by 6 paise per unit for every 500 kilometeres (km) coal would travel from mines. The northern region is likely to be the worst affected, said APP’s director general Ashok Khurana.
“The power sector will benefit in the long run if the railways spends its incremental revenue on capacity creation such as building a dedicated freight corridor as stated in the budget,” Khurana said. “However, it would be complete waste of resources if used to meet routine revenue expenditure.”
In West Bengal, the state-owned distribution company expects to receive from the government a subsidy of up to 25 paise per unit on its average tariff of Rs.5.87 a unit this financial year.
It has at least 10 million consumers, of which 9 million are domestic users. Though not the same across categories, the subsidy will be enjoyed by all its consumers.
The subsidy will translate into an annual budgetary support of Rs.500 crore. It will be adjusted against the electricity duty collected from consumers, according to the power department officials cited above.
This is the highest subsidy West Bengal will provide on power tariff in decades. In 2009-10 and 2010-11, the state government provided a subsidy of around Rs.100 crore in each year to benefit only the smallest consumers. Before that, for years the state provided no subsidy at all.
In the year ended 31 March,West Bengal provided a subsidy of 25 paise per unit because of its reluctance to revise power tariff in keeping with the increase in coal prices. This resulted in a budgetary support of Rs.400-450 crore.
The average tariff, according to the distributing firm’s petition, will increase to Rs.6.10 a unit in 2013-14.
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