Maharashtra may seek CVC opinion on PPA with Tata Powers Mundra UMPP

Written by Noor Mohammad | New Delhi | Updated: Sep 27 2013, 09:22am hrs
The Maharashtra government whose discom MSEDCL has signed a power-purchase agreement (PPA) for supply of 800 mw from Tata Powers Mundra UMPP in Gujarat may seek the Central Vigilance Commissions opinion on the Deepak Parekh committee's recommendations on compensatory tariff to avoid any controversy.

The committee, which was set up at the behest of the Central Electricity Regulatory Commission ( CERC), had recommended a necessary tariff hike of 45-55 paise a unit, along with relaxation in the RBIs loan restructuring guidelines, to bail out the 4,000-mw Mundra ultra mega power project (UMPP).

The state government fears that an approval for the compensatory tariff will require it to pay up more than what is due under the PPA signed by it. The state feels that the compensatory tariff, first mooted by the CERC, could be seen as an undue concession to a private company.

According to sources, state chief secretary JK Banthia has advised the state energy department to seek CVC opinion on the matter. It will be appropriate to take opinion of the CVC in the matter. The issue at stake includes preservation of natural assets without compromising on the contractual obligations of the operators. Compensatory tariff needs to be resolved in a transparent manner to avoid aspersions on the state government, Banthia advised Ajoy Mehta, principal secretary (energy) when the latter called upon the chief secretary recently to discuss the matter, said sources.

Significantly, UMPP is a Central government-sponsored scheme audited by the Comptroller and Auditor General (CAG). The power ministry launched the programme in 2004-05 to accelerate capacity addition in the power sector. Of the four UMPPs allocated by the ministry, Mundra is the only one based on imported coal.

Tata Power bagged the project in 2006 by quoting the lowest levelised tariff, R2.26 a unit. The company had quoted fixed fuel cost for supply of electricity for 25 years from the project, which is based on Indonesian coal. But in September 2012, the Indonesian government shifted to international indices-based coal pricing for existing and new mines, upsetting Tata Power's fuel cost economics for the project.

The CERC ordered setting up of the committee in April while hearing a petition filed by the developer. The company submitted before the regulator that it stands to lose R1,873 crore a year and R47,500 crore over 25 years of operations if not allowed to recover additional fuel costs arising from the increase in the Indonesian coal price.

The developer and discoms procuring from the UMPP Gujarat, Rajasthan, Punjab and Haryana, besides Maharashtra are required to submit their responses on the committee's recommendations by October 13 to the CERC.