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Indonesian coal prices to reflect in tariff index

NEW DELHI: The government has proposed to consider Indonesian coal prices while determining tariffs of imported coal-based projects. The move might help companies like Tata PowerBSE 0.12 %, Reliance PowerBSE 0.89 % and Adani PowerBSE 0.22 %recover fuel costs. 

The 
Central Electricity Regulatory Commission (CERC) has proposed to include Indonesian coal prices in a composite index that determines tariff for imported coal-based projects. The index, last revised in 2006, currently includes only Australian and South African coal prices. 

CERC secretary 
Rajiv Bansal told ET that the revision was necessary as there is a change in coal import pattern and about 75% of India's overseas coal contracts are from Indonesia. 

"The change will make tariffs for imported coal-based projects more reflective of imports actually taking place. Earlier no data was available for Indonesian coal but since the country has aligned its export prices to international prices data is available," Bansal said. 

Association of Power Producers director general Ashok Khurana said the change would make tariffs from imported coal power plants more realistic. 

CERC uses a composite index with Australian and South African coal prices for determining tariff to imported coal power plants. However, data shows that for the last three years about 76% thermal coal imports were from 
Indonesia and 19% from South Africa. 

The import from 
Australia was insignificant, the average for last three years being around 1%. 

"Keeping in view the request by some power producers in India, who are importing coal from Indonesia or have made contracts to import coal from Indonesia, it has been decided to include Indonesian coal prices in the indices while computing escalation rate for imported coal. The proposed revision in the methodology aims to incorporate the Indonesian coal price index and make it relevant by assigning appropriate weights to other indices....," a CERC note said. 

CERC recently offered a 'compensation package' to both the projects to cover the rise in cost of electricity production for its 4,620-MW Mundra plant. Reliance Power has stopped work on its 4,000-MW ultra mega power project at Krishnapatnam in 
Andhra Pradesh while it awaits a similar relief from CERC. 

The regulator has ordered to form a committee that would suggest ways to calculate the relief. 

The committee would comprise principal secretary (power) of Gujarat, heads of the companies, concerned state electricity distribution utilities and an independent financial analyst.