He said that higher cost of fuel reflects in fuel adjustment charge (FAC), which has to be passed on to the consumers in the form of increased tariff.
"Under the Electricity Act 2003, FAC has to be built in in a formula while determining tariffs. Some state electricity regulatory commissions have already done this and increased tariffs. But it has to be done regularly," he said.
"We understand that consumers will be burdened with the increase in tariff. But if there is shortage of fuel and it has to be procured at higher cost, then it will have to be passed on," Deo added.
He also said that there was a need for state power distribution companies to look at entering into medium term power purchase contracts instead of long term.
"States have entered into long term contracts for almost 25-30 years with various companies under the ultra mega power projects. But with the uncertainty in the coal availability and increase in prices, the state governments should look at medium term contracts of around 8-10 years," Deo said.
Source- Economic Times