1. Troubled Tata Mundra plant gets partial relief from CERC

Troubled Tata Mundra plant gets partial relief from CERC

The CERC has allowed CGPL, the Tata Power arm that runs the beleaguered 4,150-MW Mundra ultra mega power plant, to receive compensation for change in cost of electricity generation arising from revisions in various taxes and duties during its construction period between October 2007 and March 2013.

By: | New Delhi | Published: September 9, 2017 4:35 AM
Tata Mundra plant, Tata Mundra plant news, Tata Mundra plant case, Tata Mundra plant row, Tata Mundra plant cerc, Tata Mundra plant relieved, Coastal Gujarat Power, cgpl Overall, CGPL has been allowed compensation worth Rs 77.9 crore from rise in cost it had to incur due to change in various laws, while it has to pass on Rs 37.9 crore gained from tax reductions.

The Central Electricity Regulatory Authority (CERC) has allowed Coastal Gujarat Power (CGPL), the Tata Power arm that runs the beleaguered 4,150-MW Mundra ultra mega power plant, to receive compensation for change in cost of electricity generation arising from revisions in various taxes and duties during its construction period between October 2007 and March 2013.

The company is expected to gain about Rs 40 crore from the order. Overall, CGPL has been allowed compensation worth Rs 77.9 crore from rise in cost it had to incur due to change in various laws, while it has to pass on Rs 37.9 crore gained from tax reductions. CGPL wanted CERC to declare that there was an increase of at least Rs 269.7 crore on account of ‘Change in Law’ events during the construction period.

CERC said that Rs 70.45 crore can be recovered by CGPL as it had to spend Rs 74.4 crore on land acquisition of 1,092 hectares against Rs 29.8 crore indicated earlier by the Power Finance Corporation. It also had to spend an additional Rs 29.5 crore in creating water passage. CGPL had submitted that it is burdened by Rs 235.1 crore due to increase in declared land prices.

CERC also allowed Rs 7.48 crore to be recovered by CGPL as Gujarat had increased the value added tax (VAT) from 4% to 5% for machinery and spares while VAT for residual class was raised from 12.50% to 15%.

On the other hand, CGPL has to compensate its power-buyers about Rs 35.8 crore to pass on the gains from reduction in central sales tax (CST) during the construction period. The rate of CST was brought down from 4% to 3% and subsequently to 2% in the timespan. CGPL also gained Rs 2.1 crore as excise duty on civil materials, which will also be passed on to power procurers.

Gujarat’s state-run power utility Gujarat Urja Vikas Nigam (GUVNL), which buys about 48% of electricity generated from the plant, wants to acquire 100% equity of the stressed power plant for a nominal amount of Rs 1 after both the company, along with Adani Power, offered GUVNL to take over 51% equity of the Mundra plants.

The troubles of these plants began after exorbitant raise in prices of Indonesian coal in 2010. The Supreme Court, through its judgment on April 11 this year, disallowed the companies to seek compensatory tariff for rise in Indonesian coal prices.

However, the SC ruling had clarified that a change in government policy would constitute a CL that allows the regulator to fully correct the tariff disadvantage arising from it to power generators. CGPL’s Mundra plant has accumulated losses of Rs 6,457 crore and outstanding loan of around Rs 15,000 crore.

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