NEW DELHI: Government has decided to allow some power companies to pass on the costs of foreign coal to customers, a Minister said on Friday, in a move likely to boost imports and investment in power generation.
The policy will apply only to power stations that rely principally on domestic coal and buy imports to make up for local shortfalls, however. Tata Power Corporation, one of the country's best known utilities, said the policy should be extended to plants that rely on imported coal.
Meanwhile, a proposal to raise gas prices for the first time in three years has been deferred, Information and Broadcasting Minister Manish Tiwari told reporters after a cabinet meeting.
A gas price rise to near world levels would have fuelled investment in the sector and made liquefied natural gas (LNG) imports from major producers such as Qatar more attractive.
India is the world's third-largest producer of coal, and more than half its power comes from burning the fuel. But domestic output falls short of demand, triggering frequent and lengthy power cuts in Asia's third-largest economy.
It also means power producers have to turn to expensive coal imports. Until now, they have not been able to pass these costs fully on to customers.
"That's a very, very positive development," Isaac George, the chief financial officer at GVK Power, said of the government decision.
The move could help bring as much as 78,000 megawatts of generation capacity on stream, a Power Ministry source said.
India's economy grew at its weakest pace in a decade in the year to March 31, and the government is trying to tackle a raft of reforms, some leading to unpopular price rises, ahead of state elections this year and national elections in 2014.


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