Power Tariffs Likely To Rise By 2% As States Get Supreme Court Nod To Levy Mineral Tax, Say Analysts
Coal India, the monopoly supplier of coal to power and other sectors, is expected to face a liability of Rs 36,000 crore, which they will have to pay over 12 years.
Power tariffs are likely to be increased by 2% to 15 paise per kilowatt-hour due to the Supreme Court's Aug. 11 ruling allowing state governments to charge mineral tax from mining companies, according to analysts.
Coal India, the monopoly supplier of coal to power and other sectors, is expected to face a liability of Rs 36,000 crore, which they will have to pay over 12 years to various state governments where they have mining activities. However, the Supreme Court has waived the interest charges.
The coal supplier is likely to pass on the incremental cost burden due to the tax for the 19-year period from 2005 to its customers. According to the Supreme Court ruling, the tax can be recovered in a staggered manner over the 12-year period.
Given that 80–85% of customers are power generators, the annual impact on power companies for the next 12 years would be approximately ₹2,500 crore. However, the brunt of the impact would be borne by power consumers, as the final impact would be on them, Rupesh Sankhe, vice president and power analyst at Elara Securities, told NDTV Profit.
Since India produces 1,60,000 crore units of electricity annually, on the basis of the annual impact of Rs 2500 crore on power companies, the per-unit tariff is likely to go up by 15 paise, or 2% of the average power cost of Rs 7/kWh, Sankhe said. Although the tariff hike is predicted to be around 2%, the exact percentage may vary depending on various factors.
A Coal India official, speaking on condition of anonymity, mentioned that the biggest challenge is to collect the tax on a retrospective basis, especially for coal that has already been supplied and used by customers. Many of those power plants have closed in the last 19 years, so there is no mechanism to collect the tax. The majority of the coal supplied by Coal India goes to the state-run power producer, the National Thermal Power Corporation (NTPC).
As the situation unfolds, consumers are bracing themselves for a potential increase in their power bills.
