SC relief for Gujarat power plants: CERC may consider PPA revision only after all five states seek it

By: | Published: December 4, 2018 3:44 AM

A senior official from the Rajasthan energy department said that the state “has not made any call as Rajasthan goes to poll on December 7.”

The high-level committee has recommended reduction in fixed charge by Rs 0.20/unit, which would necessitate banks to reduce debts by Rs 4,240 crore for Tata, Rs 3,821 crore for Adani and Rs 2,324 crore for Essar Power.

While the Gujarat state electricity board has received a go-ahead from the state government to file a petition to the Central Electricity Regulatory Commission seeking Supreme Court-granted relief to the state’s three imported-coal-based power plants, at least three of the four other states that purchase power from these plants are yet to take a call on whether to follow the suit.

The CERC might consider the tariff revision petitions only after all states ask for it as it wouldn’t like to be drawn into a litigation, a senior functionary at the regulator told FE.
Less than a month is left for the stakeholders to approach the CERC under the SC directive. “Since the power plants (of Adani, Tata) supply power to more than one state, all parties are expected to come up with the petitions so that a possibility of litigation (by a dissenting party) can be avoided,” the CERC official said.

PK Das, Haryana’s additional chief secretary, power, told FE: “The state government is internally examining the implications of a high level committee’s recommendations”. “We are also in talks with Tata and Adani on the details of the agreement for possible tariff revision,” Das added.
A senior official from the Rajasthan energy department said that the state “has not made any call as Rajasthan goes to poll on December 7.”

Maharashtra is also learnt to have not taken a final decision yet, while it could not be immediately ascertained if Punjab government would toe the Gujarat line.
The Supreme Court on October 29 had extended a lifeline to the three troubled imported-coal-based power plants of Tata, Adani and Essar in Gujarat by allowing the CERC to amend their power purchase agreements (PPAs) to facilitate pass-through of future fuel price escalation, as per the recommendations of a high-level committee. (The Gujarat government had constituted the committee in July this year to assess if the power plants could be revived through appropriate financial and contractual re-structuring.)
The apex court had said: “We are of the view that the CERC should decide this matter as expeditiously as possible, and definitely within a period of eight weeks from today (October 29).”

Tata Power, Adani Power and Essar Power had set up 4,150 MW, 4,620 MW and 1,200 MW imported-coal based power plants respectively in Gujarat. The Tata plant has PPAs with Gujarat, Maharashtra, Haryana, Rajasthan and Punjab. While the Adani plant sells power to Gujarat and Haryana, Essar’s Salaya plant has a PPA only with Gujarat. These projects constitute about 45% of the overall power requirements of Gujarat and 22% of demand from Haryana.

The high-level committee has recommended reduction in fixed charge by Rs 0.20/unit, which would necessitate banks to reduce debts by Rs 4,240 crore for Tata, Rs 3,821 crore for Adani and Rs 2,324 crore for Essar Power.

Additionally, it also recommended to extend the existing PPAs by another 10 years after the completion of the 25-year tenure and allowing pass through of coal costs, capped at $120/tonne.

Analysts have noted that if CERC approves the high level committee recommendations, CGPL tariffs would increase by Rs 0.30-0.40/unit and Adani’s tariff would rise by Rs 0.80/unit. The rates at which the generating companies had signed the PPAs were in the range of Rs 2.26-2.89/unit. The average power purchase price in Gujarat is Rs 3.49/unit.

Till March 31, 2018, Adani, Tata and Essar had suffered financial losses to the tune of Rs 9,748 crore, Rs 8,176 crore and Rs 3,600 crore, respectively, from these power plants.

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