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Adjust coal tariff structure: Cos urge power ministry

With Indonesia hiking up its coal prices,the Indian power producers have demanded that the government modify their existing contracts to facilitate a suitable tariff structure.

Written by Priyadarshi Siddhanta | New Delhi | Published: June 22, 2011 2:18:54 am

With Indonesia hiking up its coal prices,the Indian power producers have demanded that the government modify their existing contracts to facilitate a suitable tariff structure “that allows pass through of fuel prices” to their buyers.

Putting simply,if this was done,then electricity prices would shoot up across the country.

In a letter to power secretary P Uma Shankar,the Association of Power Producers (APP) pointed out that the current contractual framework does insulate power companies from coal prices changes triggered by any change of law from the coal exporting country. It cited that Indonesia,from where bulk of coal is imported,has recently announced new regulations under which coal companies can’t sell the fuel below a “reference price”,which are again adjustable every twelve months. “Hence power projects based on imported coal are unable to secure the fuel at a fixed price. Evidently these regulations have introduced an element of huge uncertainty and volatility in imported coal prices,which also specify that existing supply contracts will have to be modified to align with the regulations,” the APP argued.

It also expressed concern that another major coal exporting nation Australia too has recently introduced a draft law that aims to levy taxes to generate additional revenue from exports of coal and iron ore,and is expected to be effective from July 2012. Besides,there is also a possibility of the country introducing a carbon tax on coal,which are likely to push up the fuel’s prices by 20-25 dollars a tonne.

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