NLC India Offers Lower Tariffs to Save Power Plants

  • State-run NLC offers to cut tariffs for Rajasthan projects
  • NLC willing to cut return on equity to save projects: Official

Smoke rises from a chimney as electricity pylons stand at a power station in Mumbai.

Photographer: Dhiraj Singh/Bloomberg

State-run generator NLC India Ltd. is offering to reduce tariffs from two of its power plants after its main buyer asked the company to lower prices or shelve the projects, according to two officials with knowledge of the matter.

NLC has offered to bring tariffs down by about 0.5 rupees per kilowatt hour, taking a hit of 1.5 percentage point to 2 percentage points on the return-on equity for the power projects in the western state of Rajasthan, the two officials said, asking not be identified as the information isn’t public. The state government wants to scrap the long-term contracts that were signed in 2010, citing the availability of cheaper solar and wind power.

Work on the two lignite-fired projects being built at Barsingsar and Bithnok, each with a capacity of 250 megawatts, has been put on hold pending the state government’s decision, the people said.

Rajasthan’s move is the latest in a series of contract breaches by state power utilities that are under pressure to ensure electricity supply to every household and are seeking ways to reduce their costs to turn profitable. A steep fall in tariffs at recent solar and wind project auctions have opened up cheaper sources of electricity for these utilities.

Sanjay Malhotra, the top bureaucrat in Rajasthan’s energy department, didn’t respond to a phone call and a text message seeking comment. NLC said it wasn’t immediately able to respond to questions.

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