Increase in rail freight rate for coal
Power generation cost to go up in Punjab
Umesh Dewan
Tribune News Service

Patiala, March 11
The announcement by the Railway Ministry to increase rail freight rates in a number of commodity slabs, including coal, will increase the power generation cost in Punjab.

Officials of the Punjab State Power Corporation Limited (PSPCL) said the hike in rail freight for the coal would definitely add to the existing power generation cost, thereby leaving the Power Corporation with no other option than to approach the Punjab State Electricity Regulatory Commission (PSERC) to increase the power tariff. Henceforth, the impact of the decision would be on all categories of the power consumers, especially the industrial sector in the state, which is already passing through a bad phase.

As per the projections made by the PSPCL in its Annual Revenue Requirement (ARR) filed for the financial year 2012-13, the total coal requirement for the thermal plants in Punjab for the next fiscal would be 125.9 lakh tonnes. The present transportation cost for coal is approximately Rs 1,500 per metric tonnes (MT). The hike of about 20 per cent rail freight for coal would increase the transportation cost to approximately Rs 1,800 per MT. The thermal power generation for 2012-13 in the ARR has been projected to be 17,375 million units (MUs). Henceforth, according to rough estimates, the total increase in the cost for power generation would be Rs 378 crore annually. In simpler terms, the net additional increase of power generation cost would be approximately 20 paise per unit.

Speaking to The Tribune, PSPCL Director Generation GS Chhabra said, "There is no escape route, as the decision has been taken by the Ministry of Railways. On account of the increase in the rail freight for coal, PSPCL will work out how much the total cost will go up. Subsequently, the Power Corporation would file a supplementary to the Annual Revenue Requirement (ARR) for the 2012-13 with the PSERC."

Experts in the power sector said that in view of the fact that the power generation in Punjab was primarily thermal based, the decision to increase the rail freight rates for coal would have direct impact on the power generation cost. Since, Punjab get major chunk (90 per cent) of coal from Jharkhand, the additional financial burden on Punjab would be more than other states, due to distance between Punjab and Jharkhand.

Meanwhile, the decision has left the industry high and dry. Strongly flaying the decision, president of the Federation of Punjab Small Industries Association, Badish K Jindal said, "The increase in coal freight to the tune of 18-24 per cent for different distance slabs will lead to costlier power, which is bound to adversely effect the industry, which is already passing through bad phase."

Speaking to TNS, general secretary, Chamber of Industrial and Commercial Undertakings (CICU) Avtar Singh said that the small-scale industry would be the worst affected. "The Union Government must review the decision, otherwise the industry in Punjab will not survive", he said. President, Apex Chamber of Commerce and Industry, Punjab, PD Sharma said, "At least the PSPCL should curtail its expenditure on the manpower, as has been directed by the PSERC and the state government. This would improve fiscal health of the cash-strapped PSPCL, which will be good for the industry."

Padamjit Singh, a power sector expert, said that the decision of the Railway Ministry would not only affect the industry, but the general public as well. "It is presumed that instead of increasing the fare for the passengers, the Railway Ministry increases the rail freight. But if power generation cost will go up, it will lead to hike in power tariff, which would directly affect both the domestic as well as industrial consumers. The burden for the costlier power will have to be borne by industry and the commoners."

The announcement to increase the rail freight for coal is second blow for the Punjab in a month. Sometime back, the Coal India had communicated to the developers of the upcoming Rajpura and Talwandi Sabo thermal plants that they wanted to amend some clauses of the Fuel Supply Agreement (FSA) to be signed between the coal supplier and the developer. It is learnt that citing shortage of domestic coal supply, the Coal India subsidiaries had verbally communicated to the developers of the thermal plants that they should accept the induction of a clause in the FSA that the supply of coal would be "domestic" and if required "imported" as well. Since, the cost of the imported coal is more than the domestic, in case the developer agrees to the Coal India condition, the cost of the power generation in the state would up, which means costlier power for the consumers.