India's power generation costs up by 50% over last 2 years

Rising cost of fuel and finance is pushing up India's generation charges by as much as 50% for some over the last two years.

Companies say that the primary reason is regulatory delay in approval for coal mining, which pushes them towards costly imports.

The country's largest power producer, NTPC, says the cost of generation of one unit of electricity (1,000 watts of power used for one hour) has gone up by up to 20% between 2010-11 and 2011-12. The rise is steeper in the private sector at over 50% for some producers.

"Costs have gone up by over 50%. In the last two-three years, regulatory delay in domestic coalmining approvals has meant that coalis being procured from the market at higher costs," said KVB Reddy, executive director of Essar Power, a subsidiary of London-listed Essar Energy.

Two-thirds of the power generated in India is from coal, and though the country has one of the largest reserves of the fuel, power producers are forced to go in for importsin the face of falling output at state-owned CoalIndia. Experts say fuel shortage could cripple power generators whose tariffs are based on competitive bidding.

While raising tariffs could be the way out for power generators and distribution companies, utilities find it a difficult proposition in a country where price of fuel and power is a politically sensitive issue.

The Delhi government has recently allowed distribution companies to increase tariffs by up to 24%.

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