The problems that the power sector in India faces highlight the apathy of the government in resolving these in time. Indeed, power producers since a long time had been hankering the government to allow them to pass on the rise in coal prices to consumers. The government chose to turn a blind eye to these demands. The power purchase agreement did not have such a provision, especially in the case of ultra mega power projects. And the government did not do much in terms of speeding up reforms in this regard.

Now as per an article in Business Standard, the government seems to have reluctantly allowed coal price rises to be passed on. But the question is who will buy this higher priced power? The industrial sector is facing a slowdown and competition has increased keeping margins under pressure. State electricity boards are already in a sorry state. They could not afford power even from producers who were using subsidized coal from Coal India. If there are no takers, power producers will be left with no choice but to absorb this cost. And thereby bear the burden of lower profitability.