Discoms get cold feet over tariff hike proposal for Mundra UMPP

Oct 10 2013, 04:40 IST
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SummaryThese utilities, which have signed power purchase agreements (PPAs) with Tata Power...

Although the Deepak Parekh committee recommended that buyers of power from Tata Power’s 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 Commission’s (CERC’s) 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 UMMP’s 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

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