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CESC seeks steep power tariff hike for FY15 on rising coal costs

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The RP-Sanjiv Goenka Group flagship CESC has asked the state power regulator for a steep 18% hike in tariff for the fiscal 2014-15 mainly to tide over higher coal costs as well as inflationary pressure on its other input costs.

CESC's tariff submission, comes on the back of a measly 0.15% hike allowed by the West Bengal Electricity Regulatory Commission last month for 2013-14.

The regulator in January allowed CESC, which supplies power to Kolkata and adjoining areas, a hike of less than a paisa for 2013-14 to Rs 6.38 per kilo watt hour. This includes a 28 paisa for variable costs adjustments.

CESC has now demanded that tariff to be raised to Rs 7.58 per kilo watt for the next financial year.

The demand is part of a three-year tariff petition where the rates asked for subsequent years in FY16 and FY17 are a modest 3% hike for each of the years.

"Major reasons for increase in tariff proposed is unprecedented inflationary pressure and consequential cost increase, together with steep increase in prices of fuel (both primary fuel coal and secondary fuel oil, partly recovered through monthly variable costs adjustments) and impact of cost of power purchase under long term agreements," CESC has said.

The proposed hike in tariff has been considered taking prices of coal and other fuel at current prices without considering future inflation. "Any increase in fuel prices shall have consequential impact on the proposed tariff. Revenue requirement is based on long term power procurement rates and any variation thereof will have a consequential effect on the company's revenue requirement," CESC said in a statement.

In trying to justify higher tariff for the power it generates and supplies, CESC cited a host of reasons, most of which relates to the functioning of the government.

"Regulatory uncertainties in domestic and international markets along with monopolistic behaviour of Indian public sector enterprises (Coal India) in natural resources sector are also posing a big threat to the availability and cost of raw materials," CESC said.

Inflation along with continuous improvement in distribution infrastructure to meet ever increasing consumer expectations, power theft and uncertainty in recovery of investment and regulatory risk are some of the other factors cited.

"High inflation has distorted all past projections and ten years down the reform line (since Electricity Act 2003 came into effect) commercial viability of the sector looks like a distant dream," it said.

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