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Home News Power Sector News distribution utilities bear the brunt of coal crisis

distribution utilities bear the brunt of coal crisis

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Coal crisisIndia's coal crisis has hit power distribution utilities the most as they bought electricity at 14 per unit to meet the high demand in the festive season, and sold it at the fixed tariff of between 3 and 4, further squeezing their finances and increasing the risk of defaults, government and industry officials said. Utilities, which already have a cumulative loss of 80,000 crore and are depending heavily on short-term borrowings from banks, were forced to buy costly power as many thermal power plants have been running at sub-optimal capacity due to a severe shortage of domestic coal due to strikes and heavy rains in the past. With losses projected to rise to 115,000 crore in three years, many banks and financial institutions face the risk of default and are reluctant to lend further.

Power prices in the open market have doubled to 8 a unit in two weeks. The burden falls squarely on distribution companies as power producers such as NTPC have no liability for supply less power.

An Uttar Pradesh government official said the state utility bought expensive power during the period to avoid power cuts ahead of elections. Peak demand in Uttar Pradesh touched an all-time high of 11,500 mw on Diwali. "The state drew 1,900-mw more than its commitment to avoid a black Diwali ahead of assembly polls," a senior official in power ministry said.

Haryana, Delhi, Punjab, Uttarakhand, Madhya Pradesh, West Bengal, Chhattisgarh, Tamil Nadu, Kerala and Karnataka have also bought expensive power from the short-term open market or overdrew from the national grid inviting penalties up to 14 per unit, officials said.

Gopal Saxena, CEO at BSES Rajdhani, one of Delhi's electricity distribution companies, said it bought electricity at 14 per unit for a while and the average cost of purchase was around 7 during the period.

Saxena said distribution utilities are unable to prepare for such contingencies due to lack of funds. "The regulatory reforms have not been kept at pace. There is no cost reflective tariff that is leading to an impasse. We have not been able to carry technological and commercial upgradations."

Till Sunday, 30 of 89 coal-based power projects had 'supercritical' coal stock to last less than four days. Another 18 plants just had seven days' stock against the normative requirement of 22 days.

The losses may rise further as the government proposes to increase penalties on distribution utilities for overdrawing from electricity grid.

Source- Economic Times


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