FE Exclusive: SC ends Toshiba’s five-year ordeal, allows company to supply ‘green power’

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New Delhi | Updated: August 6, 2015 8:00:30 PM

Allows company to supply green power

ToshibaSupreme Court has removed a hurdle to its plan to set up a gas-based power plant in the country’s first eco-city being developed by a consortium led by it in Manesar, Haryana. (Reuters)

Ending five long years of torment for Japanese firm Toshiba, the Supreme Court has removed a hurdle to its plan to set up a gas-based power plant in the country’s first eco-city being developed by a consortium led by it in Manesar, Haryana.

The SC upheld an order issued by the Haryana Electricity Regulatory Commission (HERC) that said the Japanese firm can directly supply “green power” (to over 1,000 units) in the city, along the Delhi Mumbai Industrial Corridor (DMIC), via a ‘shared’ dedicated transmission line.

The Dakshin Haryana Bijli Vitaran Nigam (DHBVNL) had challenged the HERC order before the Appellate Tribunal for Electricity (Aptel), arguing that Toshiba as a generating company cannot supply electricity to industrial users directly without a valid distribution licence. These entities had contended that the Japanese firm’s proposal was in violation of the Electricity Act, 2003.

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Toshiba’s saga for setting up the power plant in the Manesar industrial park has been a long and arduous one, and showed that despite the much-touted Make in India campaign, foreign investors continued to face various regulatory and bureaucratic impediments.

In April 2010, the Toshiba-led consortium had entered into a memorandum of understanding with DMIC Development Corporation (DMICDC, which is facilitating the implementation of the DMIC project) and Haryana State Industrial & Infrastructure Development Corporation to implement the the Manesar-Bawal Ecocity project in Haryana including the gas-based power plant with an initial capacity of 15-20 MW. The consortium intended to expand the capacity later.

The project was important because it was one of the ‘early bird’ projects in the DMIC region. Noting that the over 1,000 industrial units in Manesar were facing “acute problems of stable power”, the consortium aimed to supply high-quality and stable green power to medium and large industrial units. The region has 200 MW of power capacity right now, but demand is expected to be over 400MW in another five years. The consortium had also approached GAIL India for domestic natural gas allocation.

But soon it ran into trouble with the DHBVNL contesting Toshiba’s plan.

Toshiba then approached HERC for relief including approval for supplying power from its proposed plant directly to each industrial consumer through its dedicated transmission lines without obtaining a distribution licence. The consortium said for such direct power supply to its consumers, it was not seeking open access of DHBVNL and Haryana Vidyut Prasaran Nigam, which operates the State Load Dispatch Centre in Haryana. It added that, therefore, it should not be liable to pay cross-subsidy surcharge (CSS) and additional surcharge as stated by the regulator.

The HERC ruled partly in favour of the consortium, saying it can supply directly to a few consumers through a ‘shared’ dedicated transmission line for which it does not require any distribution licence subject to certain conditions.

The conditions included that the consortium shall be liable to pay CSS to the distribution licensees and additional surcharge as applicable under the regulations framed by HERC. Besides, it said the consumer getting supply through dedicated transmission line shall not indulge in further distribution of power from its load centre to anyone.

DHBVNL subsequently moved Aptel against the HERC order, which too upheld the regulatory decision. The state-run entity then took the matter to the Supreme Court (It had also earlier disregarded Toshiba’s attempts for an out-of-court settlement saying settlement issues can only be taken up after Toshiba assures necessary business approvals — that is SPV establishment and gas/ users/ land agreement under the SPV’s name).

The apex court on July 20 declined to interfere with the HERC order and dismissed DHBVNL’s appeal. Meanwhile, DMICDC has asked the power ministry to make adequate allocation of domestic gas for the project.

Toshiba, according to its lawyers, has not challenged the payment of CSS in the apex court as the court in many other matters had agreed with such a concept. “If we fight the payment of CSS, it will further delay the project and other partners in the consortium will be affected too. However, we have filed a review petition before HERC against payment of additional surcharge,” one of Toshiba’s lawyers told FE on condition of anonymity.

Toshiba’s counsel Vishal Gupta told FE that his client was “disappointed” that despite taking at face value the promises made at the “highest level” in India for ease of doing business and making investments to bring the latest technology and new concepts like ‘eco city’ to India, it had to face such delays. He said even 12 years after the Electricity Act came into effect, the ‘monopolistic’ attitude of the state distribution utilities has not changed.

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