Power crisis looms in Gujarat as Adani, Essar stop supply

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Ahmedabad | Updated: March 24, 2018 6:19:13 AM

A power surplus state till recently, Gujarat may witness a scorcher of a summer, with private power producers —Adani and Essar — discontinuing supply on account of paucity of coal.

Power crisis, Gujarat, Adani, Essar, Gujarat Urja Vikas Nigam, Supreme CourtAccording to the GUVNL official, “We have served notices to Adani and Essar and asked them to resume supply. (Reuters)

Vimukt Dave

A power surplus state till recently, Gujarat may witness a scorcher of a summer, with private power producers —Adani and Essar — discontinuing supply on account of paucity of coal. The situation forces the state to meet demand by procuring expensive power from energy exchanges and other sources. Gujarat Urja Vikas Nigam (GUVNL) has invited bids for procurement of 2,000 MW of power for April, May and June to meet rising demand. What have made matters worse is the early onset of summer which has led to a corresponding spike in demand. GUVNL has PPA of 2,000 MW with Adani Power, 1,000 MW with Essar Power Gujarat and 1,805 MW with Tata Power. Essar discontinued supply from December 15 while Adani stopped supply from January 20 without any prior notice to GUVNL or the Gujarat Electricity Regulatory Authority (GERC).

Speaking to FE on condition of anonymity, a senior GUVNL official said the state was facing a power shortage because of the supply cut from Adani and Essar. “The current power scarcity is a result of Adani and Essar discontinuing power supply in violation of their PPAs. We are managing to meet demand by purchasing power from energy exchange and other open sources. As part of preparation to cater to upcoming summer demand, we are going to purchase 2,000 MW power under short-term PPAs,” he said.

During March, power demand has increased by 640 MW to about 14,890 MW per day and it will increase more when temperature rises further in coming months. At present, Gujarat is depending on central sources for power as its own power production is not sufficient to match the demand. About 53% of power supply comes from central sector sources. The state government has served notices to Adani and Essar for resumption of power supply. It may be mentioned that as per the terms of the PPAs, if any supplier discontinues supply for over a year, it would be declared a defaulter.

According to the GUVNL official, “We have served notices to Adani and Essar and asked them to resume supply. In their response to the notice, the two power producers have said they are unable to resume supply due to shortage of coal. After completion of default period we will decide what action to be taken against them.”
Energy experts maintain that Essar and Adani have violated terms and conditions of the PPAs and have also violated the Supreme Court order by discontinuing supply.

“Interestingly, no action was taken on the issue till I raised the matter during tariff petition hearing last month. Shockingly, GERC was unaware about the situation as GUVNL had not informed it on the grounds that it was taking action against Adani and Essar as per terms and conditions of PPA,” said KK Bajaj, an energy and regulatory expert from Ahmedabad.

With present installed capacity of about 27,236 MW in the state, GUVNL can easily manage and cater power demand up to 20,000 MW. But due to stoppage of supply by Adani and Essar, GUVNL is being compelled to purchase more than 2,500 MW from the Indian Energy Exchange (IEX) at a higher rate of nearly Rs 5 per unit.

Bajaj said, “GUVNL will burden consumers with Rs 8 crore per day by purchasing costly power from the IEX and other sources. I had demanded taking action against Adani and Essar by prohibiting them from participating in any further bids of power requirement.” At present, GUVNL is managing supply to consumers with major contribution from the central sector. Moreover, GUVNL has to purchase power from the IEX at Rs 5.01 per unit during peak hours with an average cost of Rs 4.25 per unit.

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