Cost analysis of power generation in Indian thermal power stations (A case study of Dr. Narla Tata Rao Thermal Power Station, Vijayawada)

Cost is the major determining factor in fixation of price of any product or service. There are various elements of costs involved in producing a product/service, which can be divided into fixed and variable costs. Fixed cost remains unchanged with production, but the variable cost is to be changed along with the production. Hence, variable costs play a key role in the cost of the product. This paper examines the nature of costs, which incurred in the generation of power, and cost per unit of power generation and also the percentage of change in total fixed cost, variable cost and total cost during the period of study. The major findings of the study derived from analysis are: Thermal power stations are consuming mainly more coal for generation of power; it is the major cost in power generation. Next, to it, the oil consumption is the most important expenditure in power generation. The selected power generation plant imported coal from other countries, so the cost of coal per unit of power generation is naturally increased. Among the four stages of the select power plant, stage-iv is consuming less oil to generate one unit of power as it is designed with new technology. Stage-ii is also consuming less oil compared to i and iii stages. The selected power station is spending expending more operating expenditure on i, ii and iii stages, i.e., 0.06 and less on stage-iv, i.e., 0.02 per unit during the period of study. The average fixed cost of the entire power generating station during the study period is 0.57 paise per unit. Investment on stage-i is lesser compared to the other stages, hence average fixed cost of this stage is 0.35 paise per unit. The stage-iv is consuming more variable expenses compared to the other stages.