Higher expenses on fuel including,transportation and royalty payments for driving up electricity prices.

Higher expenses on fuel including for its transportation and royalty payments for driving up electricity prices, as the state-run power utility's fixed costs have hardly changed in the past several years. According to an NTPC estimate, coal prices have increased at least 15-20 per cent in the past twothree years while freight and transportation costs have increased 45 per cent. Added to this was a 14 per cent rise in royalty, which is paid to the governments of states where NTPC's plants are located. All these have led to generation costs increasing by at least 20 per cent in the past couple of years, company executives said.

The cost of transporting coal, the main fuel used for running NTPC's plants, affects in two ways, as higher power prices also impacts the Railways which uses electricity to run trains. "Every time there is a freight hike, cost of generation rises. This leads to higher traction power costs resulting in another round of rise in costs for the Railways which then will look at the possibility of increasing the tariff again," said a senior NTPC executive

.

Nevertheless, the fixed charge has increased very little. Fixed costs for NTPC stations are determined by the Central Electricity Regulatory Commission. The marginal increase in this component has come from escalation in operation and maintenance cost and adjustments in capital cost. "The energy charge which is primarily dependent on the landed cost of fuel has a direct co-relation with the coal cost, transportation cost and taxes, duties and royalty," the executive said. According to power sector officials, the cost of electricity generation would have fallen by 12 per cent, or 35 paisa per unit, if Coal India (CIL) had used the Rs 18,000 crore it agreed to pay as dividend to keep coal prices lower. "CIL increased prices at least thrice in the last three years. Prices were increased in almost all categories of thermal coal used by power companies.

In some categories, prices were doubled, allowing the monopoly to increase its cash and bank balance from aboutRs 45,000 crore in 2010-11 to Rs 62,000 crore in 2012-13," a power sector official said. "Most of the increase was possible because of price rise since production did not rise much," the official added. 

Source ET