Supreme Court pulls up Tata Power & Adani Power, says firms can't seek higher tariff

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Aug 25 2014, 19:33pm hrs
Tata PowerTata Power and Adani Power had sought higher tariff on account of adverse impact of the unprecedented escalation in fuel prices.
Pulling up the power producers Tata Power Ltd and Adani Power, the Supreme Court on Monday said that the firms cannot seek higher tariff on account of adverse impact of the unforeseen and unprecedented escalation in the imported fuel prices after bagging contracts for supply of electricity to state discoms on the basis of tariff-based competitive bidding process.

A bench headed by Justice JS Khehar while asking the Appellate Tribunal for Electricity (Aptel) to decide the matter as expeditiously as possible also said that senior counsel Harish Salve and Abhishekh Singhvi, appearing for Tata and Adani have made a statements before the court that they will accept payments without prejudice in terms of the PPAs. In view of the statements made by them, the impugned order of the tribunal is rendered inoperative.

This in effect would mean that Tata Power and Adani Power cannot now charge hiked tariff from March 2014 as ordered by the tribunal on July 21.

The Tribunal's order would have provided a cushion to the companies against escalation in cost of imported coal for the plant.

Tata Adani-power

After March 2013, the tribunal had awarded Tata Mundra UMPP compensatory tariff at 52 paise per unit and Adani's Mundra project had got compensatory tariff at 41 paise unit.

During the course of the hearing, the bench came down heavily on the companies saying contract has been given to them on tariff-based competitive bidding. You (Tata and Adani) would have kept everything in mind and even cost for a period of 25 years. Once you agree to it how can you ask for increase in prices now....Its a contract which you had agreed to. Now you can't claim that its a loss.

You have been awarded the contract because you were the lowest. You are saying you buy coal from Indonesia. But you can get it here. Whether it is available here or not it's your decsion, Justice Kehear said when the companies were trying to justify the Aptel's order that allowed Tata Power and Adani Power to recover dues from procurers on account of unforeseen rise in import cost of fuel but maintained that arrears from before March 2013 cannot be recovered by power producers.

Salve argued that 54 paise increase has been given to me (Tata). Tentatively. it doesn't come to even one paise increase. This is a commercial reality.

According to an estimate, pre-March 2013 dues for Tata Power's 4,000 megawatt Mundra plant in Gujarat stand at Rs 330 crore, while the same for Adani's 1,980-MW Mundra project in Gujarat is Rs 830 crore. State discoms of Gujarat, Haryana, Punjab, Rajasthan and Maharashtra procure power from Mundra-based plants of Tata Power and Adani Power.

The apex court also pulled up the Haryana electricity distribution companies which had sought stay on the Aptel's order that validated compensatory tariff to Tata Power and Adani Power.

However, it said that on merits we are tentatively 100% with you. But you participated in the committee set up to decide on compensating the firms (for higher cost of coal imports from Indonesia.) Then it doesn't matter if it is 5 paise or 54 paise.

Additional solicitor general L Nageshwar Rao, appearing for Haryana discoms, argued that the contract was entered with the producers after competitive bidding and they are governed and bound by PPAs. Any increase in tariff has to be passed on to the consumers and the difference is 54 paise per unit... I participated in the panel without prejudice as per the orders just to find a solution. You can't hold it against me, the senior counsle said.

Prior to Aptel's interim order, CERC, in April last year, had allowed Tata Power and Adani power to recover compensatory tariffs from five state discoms that have PPAs with power producers.

Also, Reliance Power had filed petitions with CERC for compensatory tariff on various accounts for its three UMPPs -- Sasan, Tilayia and Krishnapatnam.