Covid-19: Odisha seeks concessions in coal prices to ease power sector woes

Wants coal companies to discontinue charging any premium or incentive on bridge, flexi or long-term linkage coal being availed for 2020-21 or at least for the next six months

Taking note of the serious dent in the power sector after the surfacing of the Covid-19 pandemic, the Odisha government has pitched for making available key fuels such as coal, lignite and gas at concessional prices.

The announcement of sops by the Central government will help ease the burden on the distressed power sector and bring consequential succour to the consumers, feels Odisha’s Chief Secretary Asit Tripathy.

“The coal price can be reduced for this period linked to recovery of the operation cost only, deferring all capital expenses such as depreciation, interest payments and return on equity. Similar concession in lignite and gas prices can be extended. Standard pricing of coal needs to be discontinued now and each coal company needs to declare their price based on their cost of production excluding the capital costs,” Tripathy wrote in his letter to Union power secretary Sanjeev Nandan Sahai.

He suggested that coal companies can be directed to discontinue charging any premium or incentive on bridge, flexi or long-term linkage coal being availed for 2020-21 or at least for the next six months. Besides, necessary instructions can be issued to coal companies and Railways to supply and transport coal without deposit of advance payment for coal cost and rail freight respectively for 2020-21 for a minimum tenure of next six months.

To soothe financial pain for power producers, Odisha has recommended deferring deadline for installation of Flu-gas Desulphurization (FGD) plants by two years. Moreover, inter-state transmission charges can be slashed by 50 per cent for FY21 or at least for six months. This can be worked out by postponement of their capital cost (depreciation, interest cost and Return on Equity). This cost can be allowed during the balance life period of the assets or possible extension of their life.

Since the outbreak and spread of the deadly virus can engender a revenue gap for power sector, Tripathy has suggested that Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and other financial institutions should provide credit to the power sector at concessional rates. The envisaged rate could be bank rate plus service charges to generators, transmission companies and distribution companies for bridging revenue gaps as per the certification of the respective State Electricity Regulatory Commission (SERC) at a concessional rate. The cost of such funding should be allowed to be passed through by the Regulatory Commissions in the respective tariffs through appropriate directions from the government.

For the Ministry of New & Renewable Energy (MNRE), the Renewable Purchase Obligation (RPO) can be reduced for 2019-20 and 2020-21.

“Due to must run status provided to various RE (renewable energy) power projects; state is curtailing power from low cost power sourced due to reduced power demand. As such, must run status for RE projects be withdrawn for 2020-21 or at least for next six months so that low cost power from alternative sources can be availed. Alternatively, all renewable energy power generators be given option to supply power at weighted average variable cost of power purchased from conventional sources of power during the month for this period”, the letter to the Union secretary (power) read.