Power India found from a news article on Economic Times that the Power Ministry is planning to allow power producers to raise tariffs if the fuel costs of new projects rise; this move may hurt consumers but will rescue the huge investments being made in the power sector.
However, currently this is bein planned for the new power projects such as the next Ultra Mega Power Plant (UMPPs) and Gas based Power Plants with a capacity of over 7000 MW which have been built but not operational due to fuel unavailability.
As said by Power Minister
….building new capacity was a priority for his ministry and he was monitoring all new projects, helping the country add a record 20,500 mw of new capacity in 2011-12. He said appropriate policies for fuel supply and tariffs were important to sustain the momentum”
As said earlier the move to link tariffs to fuel costs would not apply to existing UMPPs of Tata Power and Reliance Power, which are suffering because they can't bill customers for the sharp rise in cost of imported coal; however the Power Ministry is considering some solutions for these projects also.
New power projects with a capacity of more than 30,000 mw are idling or underutilised because of acute fuel scarcity and high cost of imported coal. Power Ministry said if fuel costs are passed on to customers, power producers would be able to use existing capacity and build new plants.
Several gas projects have suffered because output from Reliance Industries' KG-D6 block has fallen. The company recently said it was preparing multi-billion dollar investments in new fields but it needs market-linked pricing.
The government has approved a price of $4.2 per unit for KG-D6 gas up to 2014, but the company wants to raise rates before that to help it invest more in new fields, which would not be viable at the old price.
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