In a move aimed at ensuring timely compensation to power generating companies for any post-contract spike in fuel costs, the Union power ministry has asked state electricity regulators to adopt an ‘automatic pass-through model’, which will require the state-run power distribution companies (discoms) to pay higher tariffs to power plants as soon as the cost of fuel escalates.
The move is seen to cut the delays traditionally seen in the process of vetting power costs and improve the liquidity position of power generators. However, a fallout of the move could be a further rise in discoms’ losses, if the end consumers are spared from the burden, under political pressure.
The step was taken by the power ministry after assessing the recent coal crisis scenario in the country, when many power plants had run short of the fuel. Private power plants have to pay for the fuel in advance to coal companies, and low liquidity prevents them from keeping adequate stocks at the generating stations.
