Private power companies seek fuel cost pass through for UMPPs

NEW DELHI: Citing volatility in international coal prices, private power producers have written to the Power Ministry asking for a pass through of higher fuel costs to consumers in ultra mega projects running on imported coal.

Many power projects are facing issues related to rising price of imported coal, especially for the dry fuel procured from Indonesia.

"On imported coal-based UMPP (Ultra Mega Power Project), we maintain that due to unprecedented price volatility seen in international coal market, in recent times, a 25-30 year contractual arrangement on fixed levellised tariffs is unworkable," the Association of Power Producers (APP) said in a letter to Power Secretary P Uma Shankar.

A grouping of about 22 companies, APP members include Reliance Power, Tata Power, Adani Power, Lanco Infratech and GVK Power.

"Efficiency needs to be ensured through Station Heat Rate (SHR) and Fixed Charges discovered through competitive bidding process, with fuel cost being pass through," the letter dated February 29, said.

SHR -- an indicator of efficiency -- generally refers to kilo calories of heat required to produce one unit of power.

The letter carries comments from the private power producers on draft of standard bidding documents for UMPPs.

Existing bidding documents does not have any provision for inclusion of fuel prices escalation.

According to the letter, the captive mine allocated to UMPP should have all clearances for environment and forests related issues. "This in fact should be condition precedent to the bidding process," it noted.

So far, four UMPPs have been allotted to developers. While Reliance Power has bagged Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand) projects, Tata Power is developing Mundra UMPP in Gujarat.