May , 2017
Availability of better quality domestic coal leads to reduction in power costs
14:43 pm

Ankita Chakraborty

The easy availability of good quality domestic coal has led to a reduction of costs involved in power production. This has reduced the burden on consumers in India. The downward swing of power prices can also be attributed to a series of coal sector reforms initiated recently. The initiatives to improve coal quality and bring about higher efficiency in the supply chain have brought down power prices in spite of revisions in the coal prices, central cess and railway freight in the last three years.

Lower cost of power ultimately benefits consumers through lower tariff. As per available government data, power stations are now burning 8% less coal than what they used to three years earlier, for generating each unit of electricity.

NTPC, which accounts for 17% of all generation capacity in the country and is the key supplier to states, has reduced its coal consumption by 5.5% in 2016-17. NTPC’s coal cost stood at Rs. 2 per unit in 2014-15 and should have risen by Rs. 33 due to revisions in coal price, government cess and railway freight. It stood at Rs. 1.94 per unit for 2016-17. In other words, even after paying Rs. 33 more since 2014-15, NTPC’s power costs Rs. 6 less today.

The import substitution of over Rs. 23,000 crore also saves fuel costs. Power stations are burning less coal to generate each unit of electricity riding on assured quality of domestic fuel. The cost of coal alone contributes 54%-60% of the price charged by power producers. The government’s initiatives to improve the supply chain have also added to cost reduction of the sector. Availability of improved quality of coal has also contributed significantly in controlling the cost of power.

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