Adani Power, Tata Power and Essar Power had cited a change in Indonesian rules in 2010 as a force majeure event that raised the cost of coal imported from that country to fuel their power plants. Photo: Mint
Adani Power, Tata Power and Essar Power had cited a change in Indonesian rules in 2010 as a force majeure event that raised the cost of coal imported from that country to fuel their power plants. Photo: Mint

Gujarat allows power tariff hikes, in relief to Tata, Adani, Essar

The pass-through of higher cost of coal to consumers will be by amending power purchase agreements with Gujarat Urja Vikas Nigam and approaching the power regulators for approval

Ahmedabad: In a major respite to beleaguered power projects of companies such as Adani Power Ltd, Tata Power Co. Ltd and Essar Power Ltd, the Gujarat government has issued an order to allow tariff hikes by the three imported coal-based power plants, according to two government officials in the know of the development. They did not wish to be identified.

The pass-through of higher cost of coal to consumers would be by amending their power purchase agreements (PPAs) with Gujarat Urja Vikas Nigam Ltd and approaching the power regulators for approval, they said. The Gujarat government had issued an order for the same on Saturday.

In October, the Supreme Court threw a lifeline to the three troubled power projects by directing the apex electricity regulator, the Central Electricity Regulatory Commission (CERC), to decide on PPAs.

Adani Power, Tata Power and Essar Power had cited a change in Indonesian rules in 2010 as a force majeure event that raised the cost of coal imported from that country to fuel their electricity plants.

The apex court’s directive follows recommendations of a committee constituted by the Gujarat government to look into the possibility of “contribution by each stakeholder, including banks, project developers and procurers, by way of concessions for mitigating hardship".

Tata Power on Monday welcomed the resolution by the government of Gujarat to accept the recommendations of the committee in giving some relief to Mundra Ultra Mega Power Project that meets nearly 23 percent of Gujarat’s requirement of power at a very reasonable cost.

The company said in a statement that the move will provide relief to Coastal Gujarat Power Ltd to continue its operations to meet its obligations to all the five beneficiary states.

It further said though the coal cost is now a pass through, it would continue to make losses due to rebate on financing cost and coal mines profit being passed on to the beneficiary states.

The committee has recommended that the compensation would be with prospective effect. As per the initial report by the committee, the burden on consumers would be about 40 paise per unit.

Tata Power’s Coastal Gujarat Power Ltd (CGPL) and Adani Power had earlier approached the CERC seeking higher tariffs on the grounds that their input costs had gone up due to depreciation of the rupee and higher costs of coal imported from Indonesia, following a regulation passed by the South-East Asian nation in 2010.

On 2 April 2013, the CERC had rejected Adani Power’s plea of force majeure and “change in law", but constituted a committee to suggest payment of compensatory tariff to the power company.

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