On eve of Sasan start, RPower seeks tariff hike

Written by Anil Sasi | New Delhi | Updated: Jan 26 2013, 07:34am hrs
Claiming a hit of over R350 crore on account of change in law, Reliance Power has applied for a hike in tariff for its Sasan power project the countrys first ultra mega power project even before electricity generation has commenced from the project. The reasons cited in the petition include a revision in water charges and hikes in excise duty and royalty on coal.

In the petition moved before the Central Electricity Regulatory Commission (CERC), slated to come up for hearing on January 30, Reliance Power arm Sasan Power has sought compensation saying the change in law will be impacting revenues and costs during the operating period. The petition, filed on January 16, 2013, comes just ahead of the scheduled commercial operation date (COD) of January 31 for the first unit.

Under the original power purchase agreement (PPA) signed by the developer, electricity was to be delivered by Sasan Power to a clutch of 14 distribution utilities at a levellised tariff of R1.19616/kWh over 25 years. The R350-crore compensationsought by the developer, which works out to a tariff hike of slightly over 13 paise per unit, could possibly delay the commissioning of the project.

Responding to a query, a Reliance Power spokesperson said the application before the CERC seeks compensation under the change of law head as provided under Article 13 of the PPA.

On whether the first 660 MW unit of the project would be commissioned by January 31, he quoted a statement attributed to Reliance Power CEO JP Chalasani saying: ...Pre-commissioning activities have started at our 3,960 MW Sasan project and the project is all set to be commissioned in this quarter, well ahead of the bid schedule.

The move by Reliance Power puts a spanner in the works for the power ministrys ambitious UMPP programme, wherein developers quoting the lowest tariffs are handed out large-sized projects with pre-project clearances by government agencies. Reliance Power, which had bagged three UMPPs, had stopped work in mid-2011 on its Krishnapatnam UMPP in Andhra Pradesh, invoking the force majeure clause.

The Sasan project comes bundled with captive mine blocks. A CAG report last year had pegged undue benefit of around Rs 29,033 crore from a government decision allowing the diversion of surplus coal from blocks allotted to Sasan project for Reliance Powers other projects.

Reliance Power, in its petition, has invoked Article 13.2 of the PPA (read with Section 79(1)(b) of the Electricity Act, 2003) seeking certain reliefs to recoup/adjust the project economics for certain changes in law, including an increase in water charges by Madhya Pradeshs water resources department of (notification dated 21.4.2010), an increase in the rate of royalty on coal by the coal ministry (notification dated May 10, 2012), levy of clean energy cess by the Centre in the Finance Act, 2010, (Notification dated June 22,2010, issued by the ministry of finance).

Reliance Power has also cited the imposition of excise duty on coal by the Centre in the Finance Act, 2012 (with effect from April 1,2012), change in Income Tax rates introduced in the Finance Act, 2012, (from April 1, 2012) and an increase in Minimum Alternate Tax Rates (introduced in the Finance Act, 2012, with effect from April 1, 2012) as among the 10 key reasons under the change of law head.

The Madhya Pradesh Power Management Company and 13 other distribution companies from UP, Rajasthan, Punjab, Delhi, Haryana and Uttarakhand were to get power from the project. Reliance Power was declared a successful bidder for the project in Singrauli district in Madhya Pradesh and a letter of intent was issued to it on August 1, 2007. On August 7, 2007, a PPA was signed between the petitioner and the 14 procurers.