Come June electricity prices to increase as coal prices shoot up

Electricity prices may get costlier due to rise in coal prices as the price of coal grades consumed by the power sector — G8 to G13 —have been increased by 13.4% to 18.75% said a report in The Economic Times. Beginning May 30, Coal India has increased prices of lower grade coal, this is the first broad-scale price revision by the company after three years. The development comes when stockyards of power plants and pitheads of Coal India subsidiaries are full to the brim with coal, leading to a reduction in sales. Officials from the National Thermal Power Corporation said preliminary estimates suggest a 10 to 13 paise per unit rise in the cost of producing electricity at its plants.

Prices were increased for some grades of coal and lowered for other grades. The changes will result in additional revenue of an estimated Rs 3,900 crore every year. This amount will help Coal India (CIL) as it gears up for another round of wage negotiations with worker unions, which have demanded a 50% increase in gross salary. CIL officials estimate an almost Rs 5,000 crore increase on account of the wage revision, the bulk of which will be taken care of by higher coal prices .

At present, labour accounts for almost 50% of production costs. "Considering the hikes in price including royalty and taxes, the variable part of the energy generation cost is expected to rise by around 9%," said Sabyasachi Majumdar, senior vice president at ICRA Ratings. "Any hike in power tariff is detrimental to the government's mission of providing affordable electricity to every household," said Subhasri Chaudhuri, secretary general of the Coal India