KOLKATA (miningweekly.com) – Indian power tariffs were poised for another round of hikes following the government’s rejection of the pool price mechanism for imported coal.

The country’s apex economic decision making body, the Cabinet Committee for Economic Affairs (CCEA) on Monday failed to approve the pool price formula that would have allowed the calculation of an averaged feedstock price for both domestically mined coal and imported coal, thereby providing relief to thermal power plants that use imported coal.

Following the rejection of the pool price proposal, the CCEA on Monday directed the Coal and Power Ministries to devise an alternative formula under which import-based thermal power plants would be able to pass along higher feedstock costs to consumers through tariff revisions, a government official said.

However, the official said that tariff hikes would vary, depending on the feedstock supply arrangements and the date of commissioning of the power plants, adding that these factors have enabled the division of power plants into three groups that base their prices on different fuel-cost pass-through formulas.

In the first category, thermal power plants with aggregate generating capacity of 65 185 MW and commissioned before 2009 would had fuel supply agreements (FSAs) with Coal India Limited (CIL) for 100% feedstock requirement, and would continue to rely on cheaper domestic coal and, hence, would not be forced into a tariff hike.

In the second category were thermal power plants commissioned after 2009, with aggregate generation capacity of 36 000 MW, which had FSAs with CIL for 65% of their coal requirement and would be import dependant. These would also not be impacted, as these projects were awarded to investors who had concluded power purchase agreements (PPA) with distributors on a cost-plus basis.

The third category consisted of power projects under construction that had neither coal linkages nor PPAs with distribution companies, and which have now been left in the lurch with no decision taken yet on feedstock supplies or costs.

However, officials said that with the pool price mechanism junked, thermal power projects which had been awarded to investors on competitive tariff-based PPAs, would have to be offered a window to pass on higher imported coal costs to consumers through tariff revisions.

India had already awarded 16 thermal power projects under tariff-based competitive bidding, each with installed capacity of 4 000 MW and based on imported coal. Two of these projects - called ultra mega thermal power plants (UMPP) - were being developed by Tata Power and Adani Power in the western Indian province of Gujarat and were operational.

Meanwhile, electricity tariff regulator, the Central Electricity Regulatory Commission, had already offered a bail-out package to these two operational UMPPs by permitting them tariff revisions to offset the higher cost of feestock, even though these two projects were awarded based on tariffs the companies quoted during the bidding process.

However, several power sector analysts said that such tariff revision, following the scrapping of the pool price proposal, could open up a Pandora’s box of legalities, as there were several generation companies with binding PPAs based on tariffs with distribution companies - many of them controlled by provincial governments.

With Indian elections due next year, tariff revisions may not be politically acceptable to government-owned power distribution companies, the analysts said.

The total Indian power generation capacity was pegged at 223 343 MW of which 130 221 MW was coal based.

As previously reported by Mining Weekly, India’s Central Electricity Authority has projected the country’s coal imports for thermal power generation during 2013/14 at 80-million tons.