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Power tariffs may rise by INR 1.5 per unit

Power tariffs in North Indian states may go up by INR 1.5 per unit following government decision to double the price of gas sold under the administered price mechanism.

Gas based power plants drawing APM gas supply power mainly to north Indian states such as Haryana, Punjab, Delhi, Gujarat, J&K, Rajasthan and Himachal Pradesh. Natural gas produced by ONGC and Oil India from blocks given to them without competitive bids are termed as APM gas.

The APM gas price hike will raise electricity generation cost of gas based power utilities by INR 0.90 to INR 1.20 per unit Kwh. The final price of electricity for consumers will be marginally higher subject to price formula worked out by distribution companies and approved by regulatory commissions.

Mr Sushilkumar Shinde power minister on the sidelines of a FICCI said that “The increase in administered gas price will certainly increase the electricity rates because the cascading effect is bound to come on such things.”

Mr Shinde added that “This is true that all our units are not run on gas. All those running on gas would be affected by the increase.”

As fuel cost is a pass through in tariff the ultimate loser of the government decision would be consumers who will have to pay more as electricity charges coming from gas based stations.

Mr RS Sharma CMD of NTPC said that “I see power tariff for distribution companies rising by INR 1 per unit due to rise in the price of natural gas sourced under government’s APM formula.”

The saving grace is that gas based power plants account for only about 10% of the total generation capacity of about 1,55,000 MW. And APM gas is largely used by central utility NTPC that runs seven of its power plants with a total capacity of 3,955 MW on APM gas.

(Source: ET)