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Electricity will be costlier in Maharashtra due to hike in coal and gas prices

By Ruchi Upadhyay 
Updated Date

Mumbai: Tata Power consumers in Mumbai might have to shell out more following the Centre’s decision to more than double domestic natural gas prices. The increase in gas prices comes amid the global surge in coal prices which is also used for electricity generation by power generation companies supplying to Mumbai.

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The government announced a hike in natural gas prices to $6.10 per MMBTU (Metric Million British Thermal Unit) from $2.9 per MMBTU with effect from April 1. An increase of 62 per cent was also brought into effect for natural gas prices from deep fields, to $9.92 per MMBTU from $6.13 per MMBTU. These increases are applicable for six months.

Tata Power, one of the main suppliers of power to the island area of the Maharashtra capital, taps into its 180 MW gas-fired unit to aid the thermal-powered plant located at Trombay near Mumbai. The thermal plant of the company uses only imported coal due to strict environmental norms.

The cost of power supply from coal, which comprises 55 per cent of Tata Power’s capacity, has increased from ₹4.5 to ₹7.3 per kWh, a more than 60 per cent increase, said an industry source.

Mixed power sources
Tata Power also generates 440 MW of hydropower in addition to nearly 350 MW of renewable power that it sources at “very competitive tariffs”. According to sources, gas comprises 13 per cent of Tata Power’s power generation capacity for Mumbai.

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“The approved energy charge for TPC Unit 7 which runs on gas for FY23 is ₹2.89/kWh (at $3.6/MMBTU). With APM gas rate increasing to $6.1/MMBTU, rate of generation from TPC Unit 7 will increase to ₹4.50/kWh. Due to this, fuel adjustment charge (FAC) per unit of sales for TPC-D shall increase by around ₹0.19/kWh,” the source added.

This is in addition to the FAC impact of imported coal which is ₹1.10/kWh. With the on-going Ukraine crisis and coal shortages in India, spot merchant power prices are also likely to remain on the higher side.

Adani Electricity Mumbai (AEML), a 100 per cent subsidiary of Adani Transmission, the other big power supplier to Mumbai and its suburbs, uses a thermal-fired plant located at Dahanu to supply power. As all of AEML’s power is generated using domestic coal, the impact of the rise in rates of imported coal is less on the company.

‘Optimising coal sourcing cost’
“In Mumbai, Tata Power get power from a bouquet of sources including solar, hydro, etc. It is noteworthy here that the billing is on pooled power basis while scheduling is as per merit order. Supply to Mumbai consumers is through a mix of 180 MW gas based price which is linked to APM gas and 440 MW of hydro power which brings down the pooled cost of power.

“Tata Power optimises the power supply cost by pooling in power from coal, gas, hydro and renewable sources to manage lower tariff. It also sources most of the coal from Indonesia through long-term fuel supply agreement linked to the local indexation. Due to this reason, coal sourcing cost is very much optimised. It should also be noted that Tata Power has made sufficient fuel security for its generation plants to ensure that there is no shortage of power,” Tata Power told sources.

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