CCEA approves coal price pass-through mechanism - Angel Broking

The Cabinet Committee on Economic Affairs (CCEA) has approved coal price pass-through mechanism which allows power producers to pass on the cost of expensive imported coal to Distribution Company/ consumers.

According to Fuel Supply Agreement (FSA), Coal India is supposed to supply 65% of the total coal requirement through domestic mines and 15% can be imported through CIL or independently by the power producer. Since imported coal is expensive, PPA's signed by some of the private companies were rendered unviable. However, CCEA's decision to directly pass on the higher cost of imported coal to the Distribution Company/ consumers will ensure viability of these contracts. The move is expected to benefit power plants commissioned after 2009 by power generation companies such as Reliance Power, Tata Power, Adani Power and Lanco Infratech, among others.

Source : Equity Bulls

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