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Stressed power assets: Gujarat seeks relief for Tata, Essar, and Adani

Vinay Umarji & Shreya Jai/Ahmedabad | New Delhi 13 Oct 18 | 05:30 AM

In a move that could help revive the stressed projects of Tata Power, Essar Power, and Adani Power, the Gujarat government is seeking Supreme Court direction to the Central Electricity Regulatory Commission (CERC) to amend their power purchase agreements. 

The state government has submitted the report of a high-powered committee (HPC) to the Supreme Court. The report suggests relief to power companies. The Supreme Court on Friday adjourned the matter to October 26 and said it would hear every party involved — the states, consumer representatives, etc.

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The committee, set up under the directive of the CERC, had come up with recommendations on the three imported coal-based power projects, with a power capacity totalling 7,180 Mw.

The three projects, set up during 2006-08, were not allowed to graft the increase in the cost of imported coal on to tariffs. Costing over Rs 280 billion, the projects are on the verge of turning insolvent.

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A senior state government official said since the matter had earlier been taken up in the Supreme Court, they had gone back to the apex court, “seeking direction and support in amendment of PPAs" by way of approaching the CERC.

“We want to understand whether we are following the right procedure in the amendment of the PPAs both from the Supreme Court and regulatory commissions," he said. 

A Supreme Court judgment in April last year disallowed any pass through of the cost of coal on consumer power tariffs for the Adani and Tata Power projects.

State utilities of Maharashtra, Gujarat, Rajasthan, Punjab and Haryana had challenged an appellate tribunal order that allowed the CERC to give compensatory tariffs to power plants.

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“These units need to be salvaged and should be permitted to pass through the impact of high fuel costs equitably to consumers, lenders and other stakeholders," the HPC report recommended.

The Supreme Court disallowed the cost pass through because the PPAs in question did not have any provision to do so.

Also, the project developers had bid accordingly — single coal cost for 25 years. Tata Power signed the PPA at Rs 2.26 per unit and Adani Power at Rs 2.35 per unit.

“Currently, according to the earlier PPAs, it is not possible for Tata, Adani and Essar to supply power at these rates and the state government is ending up buying costly power from the spot market," said the official.

ALSO READ: Committee for stressed power sector looks for options after SC order 

Sector executives, however, pointed out all the other states are not on board as regards the HPC recommendations. “The court might or might not accept the plea. Other states might not agree to the tariff escalation. Punjab, Haryana, Rajasthan and Maharashtra have not accepted the recommendations of the HPC. In the past, CERC directives to increase tariffs have always been contested by states including Gujarat," said the executive. This, he said, could create a more precarious situation for these units.

When asked about other aggrieved states, a senior Gujarat government official said: "The plea pertains to the plants in Gujarat. Once the Supreme Court ruling comes, other states may take a cue from it. We are not concerned with that."

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