Discoms get cold feet over tariff hike proposal for Mundra UMPP

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Oct 10 2013, 10:10am hrs
Although the Deepak Parekh committee recommended that buyers of power from Tata Powers Mundra ultra mega power project (UMPP), hit by the rise in Indonesian coal price, pay an extra tariff of 59 paise per unit, discoms in Punjab, Haryana and Maharashtra have now got cold feet. These utilities, which have signed power purchase agreements (PPAs) with Tata Power, are meant to consume 40% of the electricity generated at the 4,000 MW plant, with the balance going to Gujarat and Rajasthan discoms.

With a sizeable chunk of the consumer base openly questioning the validity of the Central Electricity Regulatory Commissions (CERCs) April 2013 interim order allowing a compensatory package for the Mundra UMPP and even other consumers being similarly inclined, Tata Power faces the threat of losing R1,873 crore annually or R45,000 crore over the UMMPs life of 25 years, which it could have realised from the extra tariff.

According to sources, the Punjab State Power Corporation (PSPCL) did a virtual U-turn and told the CERC that the compensatory package as recommended by the regulator amounted to undermining the sanctity of the bidding process, and would lead to requests for reopening of tariff-based PPAs by other developers.

Although Haryana discoms have not rejected the Parkeh committee recommendations outright like the PSPCL, they also have suggested significant changes in the recommendations, which if accepted, could drastically reduce the quantum of compensation worked out by the committee for the Mundra UMPP and leave fuel cost under-recoveries unbridged to that extent. That is something which could negate the whole purpose of compensatory tariff relief ordered by the CERC for the project, industry experts said.

Haryana and Punjab have submitted their comments on the report to the CERC ahead of the October 25 hearing by the regulator.

Although Gujarat discom, Gujarat Urja Vikas Nigam ( GUVNL), is yet to file its formal comments on compensatory tariff to the regulator, it has expressed reservations on the issue in deliberations held by the Parekh committee. It has said that as a first option to help the developer cover additional fuel costs for the plant, the coal ministry should allocate domestic coal to the Mundra UMPP. The compensatory tariff mechanism should be considered only as a second option, it said, adding, if compensatory tariff is adopted, the burden should be borne equally by all stakeholders power procurers, developer, lenders and the Centre.

As reported by FE earlier, the Maharashtra government has decided to seek views of the Central Vigilance Commission on the compensatory tariff.

The burden of compensatory tariff shall have to be shared equally by all the stakeholders concerned whereby it is expected that the power producer curtails the Rate of Return, financial institutions and banks waive or reduce interest and the Central government reduces import duty and other taxes on coal. Investment of of the generator in coal mining company should be transferred to the power project company and all returns of coal mining should adjusted in the tariff, GUVNL said in the Parkeh committees meeting on May 11. Its stand had the backing of the Gujarat government, the discom had told the committee.

In the affidavit filed to the CERC, Punjab has said: It is our stand that no extra burden is imposed on the consumers and no action be taken which will directly or indirectly, whether by compensatory package proposed or by other means, result in an additional burden to be placed on us and (consequently) on our consumers. The tariff and other terms condition for supply of electricity by the petitioner ( Tata Power) to us should be governed strictly by the PPA entered into by the parties. This was also specifically stated by us in the committee deliberations.

The Haryana discoms Uttar Haryana Bijli Vitran Nigam and Dakshin Haryana Bijli Vitran Nigam have suggested changes in the coal pricing used by the committee to work out the compensatory tariff, and also the date from which it would be applicable. It has insisted on using market-adjusted price of fuel cost quoted by the developer at the time of bidding (which works out to $42 per tonne) instead of the $32 per coal price quoted by the bidder. If this coal-pricing methodology is used, the compensatory tariff will get reduced commensurately. These discoms have also said that compensatory tariff should be calculated prospectively from the day when the CERC issues its final order in this case and not retrospectively from September 2012 when Indonesia increased coal prices.

Gujarat takes the largest share of electricity (1,805 mw) from the Mundra UMPP, followed by Mahrashtra and Punjab with 760 mw and 475 mw, respectively. Haryana and Rajasthan each are allocated 380 MW from the project.