Entrepreneurs should be made to pay the price for making wrong calls

The Government’s decision to allow power producers to ‘pass-through’ the higher cost of coal imported by them, in the tariff for electricity generated, is faulty. This is not because it may lead to an increase in prices for consumers. One cannot agree more with the Finance Minister P. Chidambaram that the choice today is between paying slightly more for electricity and not having it at all. But what makes the pass-through problematic is that it undermines the sanctity of public procurement contracts, specifically in cases where power purchase agreements (PPA) signed with state utilities do not permit producers to pass through their higher fuel costs to consumers.

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