This refers to the report "Imported coal to now make power costlier" (June 22). The Cabinet Committee on Economic Affairs (CCEA's) decision to allow power companies to pass on to consumers the extra cost of importing coal to bridge the domestic fuel shortage is flawed and dangerous. One wonders if the sole consideration was to prevent thousands of crores of investment from going sour. The CCEA has no authority to take such a decision. Power rates can only be set by the statutorily formed Central Electricity Regulatory Commission (CERC), or by a contract between the buyer and the seller. This move also seeks to change the terms under which contracts were awarded under bidding - terms that excluded the rise of the cost of coal from future rate consideration. This can quite conceivably make redundant the expert committee set up under the CERC order, and open the gate for legal challenges by parties who had lost out in the bidding. While one acknowledges that an increase in the cost of coal can seriously affect the fortune of many power generators, this action actually seems to grant producers the right to make adequate profit under circumstances where the risk - both upside and downside - was clearly on the power producers. This decision goes against the basic capitalist rule of risk-reward link, of sanctity of contracts, auction bidding and equity, because had coal prices gone down, the producers would not have lobbied so hard to lower their contracted rates. Under the circumstances, the best option would have been to offer a compromise for acceptance of both the producers and consumers, that if a producer seeks pass-through for coal cost, it would then also accept a lower return on equity of 10 per cent. Lower risk entitles lower return.
P Datta Kolkata
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