Gujarat govt forms committee to help troubled power plants
Gujarat government has decided to form a high powered committee that will offer solutions for imported coal -fired power plants that are underutilised due to viability issues
Ahmedabad: In a move aimed to provide some respite to the beleaguered power projects of companies like Adani Power, Tata Power and Essar Power, Gujarat government has decided to form a high powered committee that will offer solutions for imported coal fired power plants that are underutilised due to viability issues.
The committee chaired by former Supreme Court judge Justice R. K. Agrawal will look into the possibility of “contribution by each stakeholders including banks, project developers and procurers by way of concessions for mitigating hardship,” according to an order passed by the state government on Tuesday and seen by Mint.
The committee will submit its report in two months.
Apart from Justice Agarwal, former RBI deputy governor S. S. Mundra and former Central Electricity Regulatory Commission chairman Pramod Deo will also be part of the committee to be assisted by SBI Capital Markets Ltd and NTPC Ltd.
In June 2017, Tata Power offered to sell 51% stake in its subsidiary 51% stake in its Coastal Gujarat Power Ltd (CGPL) unit, which runs the 4,000 mega-watt (MW) Mundra power plant, for a token sum of Rs1 to discoms that have agreed to procure electricity from the project.
Subsequently, Adani Power also offered to sell stake in its 4,620 MW power plant for Rs1, also located at Mundra. Essar Power also made a similar proposal for its 1320 power plant at Salaya near Jamnagar in Gujarat.
These projects have been in a bind ever since the Supreme Court set aside a Appellate Tribunal for Electricity’s decision that allowed Adani Power and Tata Power to charge compensatory tariff against the increased cost of coal imported from Indonesia.
Due to non-allowance of any relief on account of promulgation of Indonesian Coal Regulation as ‘force majeure’ of ‘change in law’, the states of Gujarat, Maharashtra, Rajasthan, Haryana and Punjab are in receipt of numerous representations from power generators that are suffering from huge financial losses and have shown their inability to honour the power purchase agreement obligations with full capacity.
They have represented that this situation has not only wiped out their net worth but they are also unable service the bank debt without further capital infusion, the government order stated.
On the other side, all these five states—having total tied up capacity of 8224 MW with Tata Power, Adani Power and Essar Power—are facing shortage of power available at levelised tariff, and are required to purchase/generate the power at higher cost. As a result, the consumers of these states have to pay much higher cost for electricity, according to the Gujarat government order.
Coastal Gujarat Power and Adani Power went to Central Electricity Regulatory Commission (CERC) seeking higher tariffs on the grounds that their input costs had gone up due to depreciation in the rupee and higher costs of coal imported from Indonesia owing to a regulation passed by the Southeast Asian nation in 2010.
On 2 April 2013, CERC rejected Adani’s plea of ‘force majeure’ and ‘change in law’, but constituted a committee to suggest payment of compensatory tariff to the power company. CGPL’s request was rejected on 15 April that year. On April 7, 2016, the Appellate Tribunal for Electricity (Aptel) order suggested that the price they agreed on to sell power would not be binding for the producer companies if there is a significant increase in the price of coal. In April, the Supreme set aside a decision of Aptel’s order to allow Adani Power and Tata Power to charge compensatory tariff against the increased imported coal cost from Indonesia.
“It is pertinent to mention here that after the decision of the honourable Supreme Court, these power project developers either do not supply or supply less quantum of power than as agreed in the power purchase agreements (PPAs) for sustainability of their financial resources. Due to non-availability of power under PPAs, there is huge financial implication on procurer states in respect of power purchased/generated at the cost much higher than the PPA rates which is putting these states under heavy stress,” noted the Gujarat government order.
The matter was referred to Government of India by Gujarat government for early resolution of the issue. On 20 June 2017, the ministry of power, Government of India, decided to constitute a Working Group, comprising of representatives of procurer states and State Bank of India (being lead banker for these stressed projects) for evaluating the option for ensuring sustained operations of stressed imported coal based generation projects.
SBI circulated the report of the Working Group on 10 January 2018 to all procurer states. “Further, SBI has requested to form a High Power Committee for reviewing the report and the issues…As advised by Ministry of Power and all procurer states that Gujarat being the lead procurer should initiate action for resolution of the issues related to these projects,” the government order stated.
Gujarat has PPAs for procuring about 4,800 MW from these three power plants that are run on imported coal.
The committee can also suggest any other measure for overall reduction in the cost of power generation in the interest of the consumers.
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