Adani Power’s imported-coal bill surged in the second quarter of FY27, with landed coal costs rising around 50 per cent year-on-year, but the company will have to wait more than six months to recover the higher costs through tariffs under its indexation mechanism.
The delay contrasts with its Bangladesh power supply contract, under which tariff adjustments are linked to international prices and higher fuel costs are reflected immediately in billing, chief executive officer S B Khyalia said on Monday. The company’s fuel cost increased 41.8 per cent to ₹10,229 crore in Q2 FY27 from ₹7,216 crore in the year-ago quarter, driven by higher generation volumes and the increase in imported coal costs. For the first half of FY27, fuel expenses rose 36 per cent to ₹19,768 crore from ₹14,535 crore.
“From the markets perspective, tariffs have to go up to some extent, including the merchant rates. As far as Adani Power is concerned, there is a major increase in fuel cost for imported coal-based projects,” Khyalia told investors during the company’s earnings call, flagging the pressure from higher fuel costs and the likelihood of an increase in power prices.
Fuel Prices
The increase in imported coal costs is concentrated in the company’s imported coal-based projects. While most of Adani Power’s capacity has provisions for fuel-cost pass-through, the tariff for its Gujarat project is linked to an index, which delays the recovery of changes in fuel prices. “This increase in fuel cost of imported one will get reflected almost after more than six months,” Khyalia said, adding that the increase would not be reflected in tariffs in the immediately following quarter.
The lag means that the timing of fuel-cost increases and tariff adjustments may not coincide, although the extent of the impact on margins will depend on the contractual arrangements governing individual projects. Khyalia said the increase had slightly reduced the margin the company could otherwise have earned, but that per-unit realisation at the Gujarat project was not below the actual cost of fuel.
Bangladesh contract
Adani Power’s Bangladesh power purchase agreement provides a different mechanism for recovering higher fuel costs. Tariffs under the contract are linked to international prices, allowing changes to be reflected in billing without the same delay. “In case of Bangladesh PPA, it has a positive impact because the Bangladesh tariff is determined based on international prices and so whenever international price goes up, it gets immediately reflected in their billing,” Khyalia said. Adani Power supplies electricity to Bangladesh from its 1,600-MW Godda power plant in Jharkhand.
The company also reported a seasonal increase in the effective cost of domestic coal during the September quarter, despite no increase in Coal India’s notified prices. Monsoon-related deterioration in coal quality raised consumption per unit of electricity generated, pushing up the effective fuel cost, he said. Unlike the imported coal cost increases covered by contractual pass-through arrangements, the higher effective cost arising from poorer domestic coal quality does not automatically translate into higher tariffs.
