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Web Exclusive | June 2013

CCEA may clear fuel pass through mechanism

In order to enable power plants to pass on the rise in the cost of imported fuel to end consumers, the Cabinet Committee on Economic Affairs (CCEA) may clear the fuel pass through mechanism.

Such a move may encourage power producers to use the full capacity of their power plants by importing fuel instead of running the plant at suboptimal capacity because of shortage of fuel availability from local sources.

The government may allow power plants commissioned after 2009 to pass on the rise in the cost of imported fuel to end consumers, reports indicate.

It may be recalled that the latest fuel supply agreement (FSA) by Coal India promises only 80 per cent of fuel supplies to power plants. Of this, 65 per cent would be met from domestic mines, while 15 per cent would be imported.

Recently, Minister of State for Power (Independent Charge) Jyotiraditya Scindia, Coal Minister Sriprakash Jaiswal, and Finance Minister P Chidambaram, decided to approach the CCEA to implement this mechanism.

Coal India would supply to the power plants according to the FSA. If there are any shortfalls, it would be met by imports. The higher cost of fuel would be pass through, Power Secretary P Uma Shankar is quoted as saying in a media.

But before passing on the fuel cost, the power producer needs to take the approval of the regulator, who would consider the fuel scenario and cost on a regular basis.

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