China Light Set To Reduce Mangalore Power Tariff

China Light and Power, promoters of the 1,000 mw Mangalore power project in Karnataka, is set to reduce its power tariff by nearly 18 to 20 per cent due to a decline in the price of coal. At present, the company charges a tariff of Rs 2.4 per unit.

Sources said the reduction in tariff was feasible due to the massive reduction in the price of imported coal_which has fallen by as much as 44 per cent.

They said the massive difference in coal prices could be incorporated into the power tariff as China Light and Power was ready to buy coal at spot rates instead of the long-term rate.

As compared to the $39 per tonne charged for the long-term supply of coal by the Mangalore Power Company (MPC), the spot rate has fallen to around $20 to $22 per tonne. Sources said the tariff, as worked out under the power purchase agreement, was Rs 2.4 per unit, of which fuel costs are around Rs 1 per unit.

Under the present coal supply agreement cleared by the Karnataka state government for the Mangalore Power Company, 70 per cent of the total coal requirement has to be based on long-term contracts, 20 per cent on short-term contracts and only 10 per cent on the spot rate.

The formula was worked out by the state electricity board after consultation with the promoters and financiers of the power venture.

The board had wanted the Mangalore Power Company to avail of any decline in the spot prices of coal which would thereby be passed on to the consumers (as fuel costs are a pass through).

However, negotiations between the state electricity board and Mangalore Power Company had even reached an impasse when the promoters insisted on long-term contracts.

According to the promoters, their financiers preferred long-term contracts since there was no perceived threat of the plant having to shut down due to the non-availability of fuel.

The promoters would have to cough up liquidation damages to the board in this event, which the lenders wanted to avoid.

As compared to the earlier contract_-the promoters now feel that it would not be very difficult for China Light and Power to pick up coal on arates and supply it to the site as it sources huge amounts of coal at spot rates for a variety of coal fired plants in the Asian region.

Sources said informal discussions have already started with some consultants.