BackTata Power jumps as much as 7%, NTPC slumps 11.5% on CERC order
Tata Power shares surge after CERC allowed the firm to raise tariffs and upheld its earlier order of bailout
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Mumbai: Shares in Tata Power Ltd jumped as much as 7.4% in early trade after the Central Electricity Regulatory Commission (CERC) upheld its earlier order of a bailout package to the power company for the electricity generated from its imported coal-based Mundra plant in Gujarat.
This results in an increase in electricity tariffs by 52 paise per unit for the current fiscal year across Gujarat, Maharashtra, Haryana, Punjab and Rajasthan, which are the procurers of electricity for this project.
In an order dated 21 February, which has far-reaching implications for the Indian power sector, CERC ruled that Tata Power will be allowed to temporarily increase tariffs to compensate for the additional fuel costs it is incurring on account of coal imports becoming expensive when the Indonesian government in 2012 started levying higher royalty and income tax, affecting the financial viability of the project. The position will be reviewed after three years.
In reaction to this, shares of state-owned NTPC Ltd fell as much as 11.5% to ₹ 116.95, lowest level since 21 November 2008.
“Impact on NTPC is seen as negative because the regulator has also tightened the norms for reimbursement of tax expenses, which will in turn hit on their return on equity sharply," said Arun Kejriwal, director of Kejriwal Research and Investment Services.
State utilities are likely to approach the appellate tribunal for electricity against the order.
Shares of Tata Power closed 5.02% higher at ₹ 82.65 a piece on BSE, while those of NTPC dropped 11.43% to ₹ 117.05. The 30-share Sensex added 0.53% to 20,811.44 points
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