Fuel security concerns and additional investments to be made by thermal power producers on meeting the latest emission norms is set to take away the advantage of a lower goods and services tax of 5 per cent on coal.
Despite the lowest slab of GST on coal, thermal power would be costlier in the days ahead and, thus, more uncompetitive against solar power, where rates are falling to record lows. All coal-based power stations in the country need to invest Rs 1-1.2 crore per Mw capacity for installing pollution control equipment to comply with the latest norms notified by the ministry of environment. The deadline is December this year. High ash content in coal affects thermal power plants’ emissions. “This might lead to further escalation in tariffs (rates), affecting their competitiveness with other conventional and renewable power sources,” goes a report by CARE Ratings.
According to a report of the Central Electricity Regulatory Commission for 2015-16, the cost of solar energy-based generation was Rs 2.42-4 a unit; electricity from coal-based generation was priced at Rs 2.63-5.70 a unit.
“Lower GST is clearly not an advantage when thermal power producers have to make extra investments to meet stricter emission norms. Most of the thermal power plants in the country are underutilised because of weak power demand and are facing acute competition from cheaper solar power,” said a senior official with an independent power producer.
Thermal capacity addition is being impacted by growing fuel availability concerns. While significant gas-based capacity is idle due to non-availability of this fuel, coal supplies are restricted to around 65 per cent of the requirement of thermal plants based on this, leading to increased dependence on imported coal and high generation costs.
“Coal imports rose from 43.08 million tonnes in 2006-07 to 199.88 mt in 2015-16. Most of the Indian coal reserves are of low calorific value and high ash content. This leads to burning more coal for every unit of electricity generated, which also pollutes the environment,” stated the CARE report.
Poor financial health of electricity distribution companies (discoms) has hit their purchases of power. Mounting aggregate technical & commercial losses, coupled with operational inefficiencies of the state discoms, has led to their debt dues reaching a combined Rs3.95 lakh crore.
Weak industrial demand for power saw the average plant load factor of thermal power producers, both coal and lignite based, tank to an all-time low of 59.88 per cent in 2016-17 from 77.5 per cent in 2009-10.
CARE Ratings expects the thermal power industry and its allied industries to remain subdued for the next two years in terms of capacity addition, given the government’s thrust to meet a substantial part of its ‘Mission 2022’ renewable energy targets by 2019.