Average power purchase cost rises 71 paise/unit in FY22-23

On the rise in power cost due to increased use of imported coal, Union Power Minister RK Singh, in a written reply to the Lok Sabha, said, "Average power purchase cost increased by 71 paise only between FY22 and FY23. This is because of increase in various costs – including an increase in transmission and distribution costs".

The projected peak demand as per the 20th Electric Power Survey (EPS) will be 2,77,200 MW in FY2026-27 and 3,66,400 MW in FY 2031-32. Image Courtesy: Reuters.

Average power purchase cost increased by 71 paise per unit during FY22-23 due to a rise in various overheads like transmission and distribution rates, Parliament was informed on Thursday.

On the rise in power cost due to increased use of imported coal, Union Power Minister RK Singh, in a written reply to the Lok Sabha, said, "Average power purchase cost increased by 71 paise only between FY22 and FY23. This is because of increase in various costs – including an increase in transmission and distribution costs".

The minister explained that with the rise in electricity demand from July 2021 onwards, the consumption of coal in thermal power plants increased.

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The supply of domestic coal on a daily basis was less than consumption, which resulted in the depletion of coal stock and stocks at plants came down from 28.7 million tonnes (MT) as of June 30, 2021, to about 8.1 million tonnes (MT) as of September 30, 2021, he added.

Therefore, in December 2021, the Ministry of Power advised state Gencos and IPPs (independent power producers) to import (coal) at the rate of four per cent of the total requirement and central Gencos at the rate of 10 per cent during 2022-23.

During April-September 2022 (H1 of FY 2022-23), the receipt of domestic coal was about 355 MT against the consumption of 385 MT (domestic -- 359 MT + imported: 1.4X18.9 MT) – a shortage of 30 million tonnes.

The gap between the supply of domestic coal and consumption of coal was about 1.6 lakh tonnes/day during this period, he informed the House.

To improve the situation, the Ministry of Power advised Gencos on August 1, 2022, to make the decision regarding blending at their level, taking into account the domestic coal supply and stock position (need-based blending) with continuous monitoring of stock levels.

The gap between daily coal consumption and daily arrival of domestic coal ranged between 2.65 lakh tonnes to 0.5 lakh tonnes between September 2022 and January 2023, he stated.

If the imports for blending had not been made, the coal stocks in thermal power plants would have reduced to zero in September 2022 and would have continued so, leading to widespread power cuts and blackouts, he noted.

Therefore, Singh stated that the Ministry of Power advised central, state Gencos and independent power producers (IPPs) on January 9, 2023, to import coal at the rate of 6 per cent by weight to have sufficient coal stocks at their power plants for smooth operations till September 2023.

The gap between daily coal consumption and daily arrival of domestic coal increased from 1.30 lakh tonnes per day to 2.80 lakh tonnes per day between June 2023 and September 2023, he pointed out.

Therefore, the Ministry of Power advised central and state Gencos and IPPs on September 1, 2023, and October 25, 2023, to import coal through a transparent competitive procurement process for blending, he added.

In another reply to the House, he explained that the cost of generation of electricity is dependent on the share of imported coal used and the price of imported coal.

The pricing of imported coal is linked with international indices, sources of origin, and other factors like ocean freight, insurance etc, which is purely dynamic and varies with international conditions, he noted. Also, imported coal has a high calorific value compared to domestic coal, he pointed out.

The cost of fuel, including that of imported coal, is passed into generation tariff in accordance with regulations laid down by the appropriate Electricity Regulatory Commission, Singh said.

The generation cost becomes an input for the determination of retail consumer tariff, which is again approved by the respective regulatory commission before it is passed on to the consumers, he stated. The regulator lays down norms for various input costs and does not allow costs in excess of the norms to be passed through, he stated.

In another reply to the House, the minister said the power demand of the country is increasing rapidly because we have added 2.86 crore new consumers and because our economy is growing rapidly.

"The peak demand during the FY2013-14 was 1,35,000 MW. The peak demand during the current financial year (till November 2023) has increased to 2,43,000 MW," he informed the House.

The projected peak demand as per the 20th Electric Power Survey (EPS) will be 2,77,200 MW in FY2026-27 and 3,66,400 MW in FY 2031-32, he also stated.

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