After low GST on coal, Mahagenco may cut costs


Mahagenco which is state government run power generation company has faced some respite due to the Goods and Services Tax(GST) that was rolled on July 1. Under the new tax regime, coal has been put under the slab of 5% GST which has bring down the tax component on the commodity by less than half as compared to earlier tax regime. The cost of grades of coal generally used by power houses has come down by ₹70 to ₹60 per tonne after GST.

Due to the reduction in coal tax, the cost of production for Mahangeo will also come down. Since Mahagenco uses coal in millions of tonnes, the tax reduction may lead to substantial savings for the power producer. Mahangenco has undertaken the process of making the calculations for the benefits to be passed on to the consumers. However the exact figures have not been derived yet.

Mahagenco spokesperson said that “Exact impact on power tariff  is being calculated, consumers would certainly get some relief. We need not approach Maharashtra Electricity Regulatory Commission (MERC) for getting the reduced tariff approved. The reduced coal prices will be passed on to consumers by cutting fuel surcharge which is an add-on to the bill”.

The cost of power generation usually changes when there is change in price of coal, increase in transportation cost, change in price of fuel oil, etc. However the fuel surcharge also increases if MSEDCL is forced to buy power from other than contracted sources.