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Gujarat's imported coal order to push up tariff in 5 states
Power tariffs in fives states are likely to increase following the Gujarat government's order allowing the Tata, Adani and Essar groups to pass on to consumers the higher cost of imported coal used in their power plants in the state. The order comes in the backdrop of the SC recently allowing the Gujarat government to modify the agreement​.TNN | December 04, 2018, 07:33 IST
Power tariffs in fives states are likely to increase following the Gujarat government's order allowing the Tata, Adani and Essar groups to pass on to consumers the higher cost of imported coal used in their power plants in the state,
The order comes in the backdrop of the SC recently allowing the Gujarat government to modify the agreement,
New Delhi: Power tariffs in Gujarat, Maharashtra, Haryana, Rajasthan and Punjab are set to rise following the Gujarat government's order allowing the Tata, Adani and Essar groups to pass on to consumers the higher cost of imported coal used in their power plants in the state. But industry watchers say the last word was yet to be spoken on the vexed issue.
In an order issued on Saturday, the state government asked its distribution company (discom) to reset its agreement with the power plants and seek regulatory approval for higher tariffs. The discom was also advised to circulate the revised agreement with other beneficiary states for vetting.
The order comes in the backdrop of the Supreme Court recently allowing the Gujarat government to modify the agreement in line with the bailout package recommended by a panel set up under former SC judge, Justice R K Agrawal. The SC also said the two consumer interest NGOs -- Energy Watchdog, which was the original applicant in the 2017 Supreme Court case challenging tariff hike – and Prayas could seek redressal from a suitable appellate forum. The rescue panel was set up after the SC struck down higher tariff in April 2016.
The two consumer interest NGOs had in October told the SC that the panel's bailout package would extend Rs 1.9 lakh crore benefit to the power producers at the cost of consumers. The power plants, located in Mundra, have run up a combined outstanding debt of Rs 22,000 crore after they were not allowed to raise tariff to cover the increased cost of imported coal.
Given such high stakes, any increase in power tariff could be politically ominous just months ahead of the general elections. Besides, Congress-ruled Punjab could prove to be the odd state out among the five beneficiaries by opposing a tariff hike. The two NGOs could also challenge higher tariff with the regulator and then at APTEL, further delaying a resolution.
In separate affidavits, the NGOs had said even a hike of one paisa will make a huge amount since the projects have a combined capacity that is equivalent to generating 6,328 crore units of power in a year. They said the financial distress of power plants could be resolved through the Insolvency and Bankruptcy Code mechanism in the best interest of all stakeholders. The panel had also called the NGOs for their views.
In a BSE filing on Monday, Tata Power said, "The company welcomes the resolution by the government of Gujarat to accept the recommendations of the high-power committee in giving some relief to Mundra ultra mega power project that meets nearly 15% of Gujarat's requirement of power at a very reasonable cost."
"This relief will help Coastal Gujarat Power to continue its operations to meet its obligations to all the five beneficiary states… Though the coal cost is now a pass-through, the company would continue to make losses due to rebate on financing cost, and coal mines' profit is being passed on to beneficiaries states."
Tata Power said, "This positive step is in the interest of all stakeholders, including the end consumers, who get 24X7 reliable electricity supply from the CGPL (Mundra) power plant."
In case these projects were shut down, replacing such huge capacity with alternate sources from the market would not be feasible as the short-term market prices are not only much higher and volatile, but the availability of power is uncertain, it said.
Also, establishing new imported/indigenous coal-based power plants would have significantly higher fixed and variable costs and high gestation period; and hence, would not offer any solution to immediate power requirement, it added.
Tags : Coal, Tata Power, Tata, rajasthan, Punjab (region), Maharashtra, Haryana, Gujarat, essar, Adani
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