Adani Power shares rallied over 11 per cent intraday on Tuesday after the company was given relief by Central Electricity Regulatory Authority (CERC) for its Mundra plant. According to Financial Express newspaper, the CERC has granted Adani Power full compensation for the increase in the cost of electricity generation at its 4,620-MW thermal power plant at Mundra, Gujarat following increased domestic levies on imported coal.
At 1.12 pm, share price of Adani Power was trading 7.43 per cent up at Rs 32.55. The scrip opened at Rs 30.50 and touched a high and low of Rs 33.70 and Rs 30.50, respectively. Later, the share price closed 8.58 per cent up at Rs 32.90. However, the bourses have sought clarification from Adani Power Ltd on the news.
The potential gains to the firm from the regulatory decision could not be immediately ascertained, although, it said in the petition that the assorted levies had cost it over Rs 29 crore in just one month, that is, September 2015.
The regulator’s decision comes following Supreme Court’s April 11 ruling that said power firms can’t get relief for any adverse fallout from policy changes effected by a foreign government, but expanded the scope of reliefs under the “change in law” provision in the domestic context. The apex court ruling was on a plea by Adani Power and Tata Power seeking compensatory tariff increases for the electricity supplied from their Mundra plants to discoms in many states, on account of the unforeseen hike in the prices of Indonesian coal used in these units.
In April, 2015, the Centre withdrew the customs/countervailing duty waiver on (coal) imports by the Adani Power plant and revoked the service tax exemption also. The move was part of a policy decision to treat the power project as part of the non-processing area in the Mundra Special Economic Zone. Additionally, the imported coal used by Adani Power was brought under the clean energy cess in the same month (the cess was doubled in 2016).
According to analysts, the CERC ruling amplified the scope of “change in law,” the provision in power purchase agreements that could be invoked by firms to get full immunity from post facto government policy changes.