The Rajasthan Electricity Regulatory Commission (RERC) has allowed Adani Power Rajasthan (ARPL), which runs the 1,320-MW Kawai power plant, to recover the additional cost.
The Rajasthan Electricity Regulatory Commission (RERC) has allowed Adani Power Rajasthan (ARPL), which runs the 1,320-MW Kawai power plant, to recover the additional cost — estimated by the company at Rs 1,221 crore per annum since 2014, but yet to be approved by the buyer discoms — on account of having to import coal due to reduced supplies from Coal India (CIL). The RERC’s order has relied on the April 2017 Supreme Court ruling that widened the ambit of the “change in law” (CL) provision in power purchase agreements by including changes in government’s policies — in this case, the 2013 amendments to the coal distribution policy.
Once the provision is invoked, the affected firm would get the right to fully recover the extra costs incurred on account of the policy change through tariff increases. Since the SC ruling, ARPL is the third power plant to get the CL benefits; two other Adani group plants — Mundra (Gujarat) and Tiroda (Maharashtra) — also received such benefits.
In its petition, ARPL claimed that if it were to keep the power tariff at the power purchase agreement (PPA) rate of Rs 3.20 per unit even after the changes in coal distribution policy that constrained CIL supplies and forced it to import (costlier) fuel, it would lose Rs 1,221 crore per annum. The company had, along with its Q4FY18 financial results, recognised receivables of more than Rs 2,546 crore on this account “up to March 31, 2018”.
The company had approached the RERC in 2014 claiming compensation when it was allowed an interim tariff hike of Rs 0.25 per unit, though the regulator did not recognise the event as “force majeure” or CL. However, the compensation allowance was disallowed by the Appellate Tribunal for Electricity (Aptel) in 2015. The latest ruling by RERC has been considered in the light of the Supreme Court order on compensatory tariffs, which had removed the uncertainty over whether a change in government policy would constitute CL.
The SC ruling, while rejecting the claims to compensatory tariffs of Adani Power and Tata Power on their Mundra units on account of Indonesian coal price hike, was clear that change in foreign law doesn’t amount to either CL or necessitate force majeure. However, it averred that a change in domestic policy would qualify as CL.
The Kawai power plant was erected on the basis of a memorandum of understanding between Adani Power and Rajasthan, where the state assured support to get coal linkage from the central government.
Adani’s Kawai and Tiroda plants have recently started receiving domestic coal, thanks to the Shakti scheme, from February and April this year, respectively. The Kawai plant has not imported any coal in March-April this year, while it had imported 2.8 million tonnes and 1.6 million tonnes of coal in FY17 and FY18, respectively.