Better quality domestic coal leads to power cost reduction

20 Apr 2017

The easy availability of the quality domestic coal has started leading towards reduction in the power costs for the consumers in the country.
The downward trend is witnessed on the back of coal sector reforms initiated in the last couple of years. The initiatives to improve coal quality and efficiency in the supply chain have brought down the cost of power from coal-fired plants in spite of revisions in the prices of coal, central cess and railway freight in the last three years.
Lower cost of power ultimately benefits consumers through lower tariff. As per the government data, power stations are now burning 8% less coal than they used to three years ago for 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 33 paise due to revisions in coal price, government cess and railway freight. Remarkably though, it stood at Rs 1.94 per unit for 2016-17. In other words, even after paying 33 paise more since 2014-15, NTPC's power costs six paise less today. There is also import substitution of over Rs 23,000 crore, which saves fuel costs.
The decline in the cost of power has accrued mainly from power stations burning less coal to generate each unit of electricity on assured quality of domestic fuel. The cost of coal alone makes up to 54%-60% of the price charged by power producers and is passed on to consumers, coal consumption has a bearing on tariffs and environmental dividend in terms of emissions.
In addition to burning less coal, Government initiatives to improve the supply chain has also added to the cost reduction in power. (EOIC)