The Central Electricity Regulatory Authority (CERC) has asked the government-owned integrated mining and power company Neyveli Lignite Corporation (NLC) to share the profit it earned through selling lignite to outside parties with states that procure power from the company. While this could severely impact the NLC's profitability and its plan to ramp up its thermal power capacity to 19,000 MW by 2025 from the current lignite-based capacity of over 3,000 MW, the SEBs in south India, especially in debt-laden one in Tamil Nadu, could get some relief.
In the order, the regulator allowed the company to use one price for lignite mined from six of its existing mines for arriving at the energy cost for fixing tariff for the power produced from its thermal stations for . However, the order also asked the company to share the benefits accrued from selling lignite to outside agencies with the procurers of the company, which include, Andhra Pradesh, Tamil Nadu, Karnataka, Kerala and Puducherry.
According to the order, the profit sharing would be applicable from FY11 when its latest mine (Mine II expansion) became operational even though the attached thermal station was commissioned only last year. The company used the extra supply of lignite to not only increase the utilisation of existing station but also sell it to external agencies. The revenue earned by the company from external sale of lignite has hovered around 10-12% of the total sales since FY 11.
"Any additional profit earned by sale of lignite to outside agencies shall be apportioned to the beneficiaries corresponding to their share of power in the station where pooled lignite price approved by the Commission is applicable for computation of energy charges," the order said NLC makes a significant amount of profit from sale of lignite to outside parties. As per the company, it is allowed to keep the surplus from its mines to itself as per the original mines. The lignite mines extracted from NLC mines is utilised for generation of power from the thermal generating stations of NLC and an independent power producer. The rest of the lignite is sold to external parties.
"The order is adverse to the company but it could work our for some of the discoms in southern states which are reeling under the weight of excessive debt. The discoms could also decide to pass the benefit on to the consumers," an industry insider said.
Given that the Navratna earns a substantial chunk of profit from selling lignite, the company is expected to approach the electricity tribunal against the CERC's order.
Source- Financial Express