High coal prices a dampener for gencos

Irregular payments by state-owned distribution companies (discoms) to power generation companies has been the problem most commonly cited in context of the power sector. Receiving less attention is the issue of high prices of domestic coal, which accounts for up to 80% of power production costs and impacts the balance sheet of power producers.

Experts point that domestic coal prices are high not due to the cost of coal at the pitheads but owing to steep railway freight charges and an assortment of taxes and levies. Thus, conflicting with the Centre’s agenda of reducing coal imports by 100 MT, it is cheaper for a few power plants in the coastal areas to use imported coal than buy the domestic product.