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Mumbai: The Supreme Court on Monday stayed an order by the Appellate Tribunal for Electricity (APTEL) allowing Tata Power Co. Ltd and Adani Power Ltd to charge higher prices for electricity produced from their plants in Mundra, Gujarat.

The apex court’s decision is a setback to the two power producers, which had sought a hike in tariffs to compensate for an increase in the price of imported coal that fuelled the power plants.

A bench headed by justice J.S. Khehar observed that companies cannot seek to hike tariffs because of any unforeseen and unprecedented escalation in prices of imported coal after having bagged contracts to supply power on the basis of competitive bidding.

The bench directed APTEL to dispose of the matter speedily.

The court’s order may have a bearing on other infrastructure companies, such as developers that had run into cost over-runs and other problems and have been seeking compensation.

“It seems that tariff increase decision for imported coal based plants is a never ending regulatory/judicial process," security house UBS India said in a research note. “In the latest development on this issue, the Supreme Court has opposed interim relief provided by APTEL to Adani Power and Tata Power. Though this is not a final verdict, the visibility remains low on when this would finally happen and by what quantum tariff would be raised if at all. Hence, this is bad for both Adani Power and Tata Power."

On 21 July, APTEL had passed an order allowing an increase of 52 paisa per unit and 41 paisa per unit to Tata Power’s Mundra unit Coastal Gujarat Power Ltd and Adani Power, respectively, for the electricity produced from the Mundra plants.

In February, the central electricity regulatory commission (CERC) accepted pleas by Tata Power and Adani Power for higher tariffs following a change in the pricing regime by the Indonesian government for coal exports from that country.

The CERC order was challenged by the power distribution utilities of Maharashtra, Haryana, Rajasthan and Punjab that signed contracts to buy power from these companies.

But in its interim order on 21 July, APTEL allowed Tata Power and Adani power to charge a higher tariff as per the CERC order from March, a decision that was again challenged by the state utilities.

According to industry estimates, Tata Power and Adani Power are making a loss of 40 lakh and 90 lakh per day, respectively, on their Mundra operations.

“The coal policy and electricity regulatory issues still remain the most pressing issues that must be addressed if the ambition for infrastructure development and manufacturing growth is to be realized," said Kameswara Rao, who heads the energy, utility and mining practice at consultancy PricewaterhouseCoopers India.

In July 2012, the Indonesian government changed rules and linked the prices of coal exports to spot market prices, which made long-term contracts signed by Indian firms with Indonesian miners for coal supply null and void. The order affected firms including Tata Power, Adani Power, and Reliance Power Ltd, among others.

“Court has stayed the payment of the compensatory tariff by procurers as was allowed as per APTEL’s interim order of July 21st and has further asked APTEL to expedite the case hearings and take a final decision on the subject matter quickly. As the case is already being heard by the APTEL, the Company would await a quick resolution of this issue through the required judicial process," Tata Power said in a statement.

An external spokesperson for Adani Power said: “The company would not like to comment on the Supreme Court’s today’s order as the matter is sub judice."

Tata Power’s shares fell 3.42% to 90.35 at the close of trading on the BSE and Adani Power’s shares dropped 4.09% to 52.80 on a day the stock exchange’s benchmark Sensex edged up 0.07% to 26,437.02.

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