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Home News Power Sector News Power producers to gain from fuel cost pass through plan

Power producers to gain from fuel cost pass through plan

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CERCSome of the independent power producers in the country such as Lanco Infratech Ltd, KSK Energy Ventures Ltd, Adani Power, among others, are likely to benefit from the Government's move to fix the fuel woes of the power sector and costs associated with them. The Ministry of Power had recently sought the opinion of the Central Electricity Regulatory commission on pass through of cost escalation and if this could be allowed under the existing provisions of power purchase agreements.

According to an analysis by Credit Suisse, the Central regulator's suggestion on passing through the cost would be beneficial to power producers.

The regulator had indicated that there was need to bring about changes in the new coal distribution policy and thereafter changes in the various agreements entered into by producers and utilities.

The Government is likely to consider a policy allowing domestic coal projects to pass through in tariff increases in their fuel costs on blending expensive imported coal, sources say.

The Power Ministry also wanted to know from the regulator whether existing policies permit Coal India to meet Fuel Supply Agreement commitments for post March 2009 projects, through supply of imported coal on cost-plus basis.

The regulator has opined that power developers shall need to approach the appropriate commission, Central or State, for pass-through. The respective Commission shall decide on granting any relief on a case-by-case basis in consultation with various stakeholders.

The Ministry was suggested that appropriate amendments or changes could be made to the existing provisions of electricity and tariff policies to enlarge the scope of regulatory intervention to take care of the problem of domestic coal deficit.

According to Amish Shah of Credit Suisse, this is positive for the sector as it indicates the Government and the regulator's intent to provide relief to ailing developers. The implementation of such a policy may face some resistance from state electricity boards and other stakeholders in the near term.

Source- Hindu


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