On account of higher freight charges proposed in the Railway Budget 2015 and the doubling of clean energy cess in the Union Budget 2015 are expected to result in around 5% rise in electricity prices. Further 5% increase is expected to come from other input costs such as salary & wages, components & spares etc.
In addition, utilities that have power purchase agreements in place without the ability to pass on higher generation costs to consumers are expected to be affected.
Finance minister Arun Jaitley proposed to increase the cess on coal to Rs 200 per tonne to finance clean environment initiatives. Coal India passes on the cess to consumers, which means the effect will be felt by power companies that consume coal.
Generation costs may rise 5-6 paise per unit due to higher rail freight charges, according to officials at NTPC, the country's biggest power company. Along with the increased clean energy cess, the rise in cost works out to 12-14 paise per unit, which is 5% of the current cost of Rs 2.80 that NTPC incurs to produce a unit of power. The cost of generating electricity for NTPC, which is allowed to pass on higher input charges, is on the lower side and the impact on the utility's consumers will be less than for customers of other power companies.
Companies with older power plants have a higher cost of generation since they consume more coal to produce a unit of electricity. The effect of higher power costs will vary for customers.
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