State generation utilities, power sector may come under pressure: Sunil Mitra

State generation utilities and the power sector will come under pressure if significant investments are not made in coal mining and railways to support the capacity addition plans, feels state power secretary.

“Significant investments need to be made in augmenting coal production, increasing domestic availability of coal and railway rakes to support the massive power capacity addition plan that has been set,” said Sunil Mitra, state power secretary on the sidelines of a CII conference on power distribution reforms.

This apart, under the new coal distribution policy besides the Fuel Supply Agreement (FSA) which binds power utilities to lift 90 per cent of the agreed quantam of coal from the supplying company, a memorandum of understanding (MOU) also has to be signed with it to use coal mined from underground mines at an import parity price, he pointed out. Thus while the coal supplied under the terms and condition of FSA are supplied at notified price.

The coal from underground mines supplied under the terms and condition of a MoU comes at a higher price, sometimes as high as Rs 5,900- 6,000 per tonne.

Mitra said, although coal from underground mines is of superior quality, that would increase the input cost of the power generating companies. Coal accounts for 70 per cent of power production cost and any increase in cost would impact the cost of generation. Now whether it would be passed on to the consumers or not depends on the regulator, Mitra said.