Supreme Court setback for Reliance Power’s Sasan UMPP over Rs 1,050 cr case against 7 utilities, Tata Power

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New Delhi | Published: December 9, 2016 6:28:26 AM

The Supreme Court on Thursday set aside an electricity tribunal’s order that allowed it to recover R1,050-crore dues from seven state utilities and Tata Power Distribution Company.

The Sasan UMPP is an integrated power plant cum coal mining project at a single location, involving an investment of over R27,000 crore. The Sasan UMPP is an integrated power plant cum coal mining project at a single location, involving an investment of over R27,000 crore.

In a major setback to the Reliance Power-promoted Sasan ultra mega power project (UMPP), the Supreme Court on Thursday set aside an electricity tribunal’s order that allowed it to recover R1,050-crore dues from seven state utilities and Tata Power Distribution Company.

Reinstating the CERC’s August 8, 2014, judgment that accepted the stand of the state utilities — All India Power Engineer Federation, Ajmer Vidyut Vitran Nigam, MP Management Company, Haryana Power Generation Corporation (now Haryana Power Purchase Centre), UP Power Corporation, Punjab State Power Corporation — and Tata Power Distribution, a bench comprising justices Kurian Joseph and Rohinton Nariman said the Aptel is “wholly incorrect in accepting the case of waiver” put forward by Sasan, and is “equally incorrect in absolving the independent engineer for the test certificate given by him on March 31, 2013, to the UMPP”.

The 4,000-MW Sasan UMPP, located in the Singrauli district of Madhya Pradesh, had declared the COD to be March 31, 2013, on the basis of certificate obtained from Messrs Lahmeyer International (the independent engineer). However, the same was challenged by Western Regional Load Despatch Centre (WRLDC), the apex body to ensure integrated operation of the power system in the western region. The CERC, while rejecting the COD claimed by Reliance Power, set it for August 16, 2013 and also recorded adverse remarks against the Independent Engineer who had certified the COD. This order was challenged by Sasan Power before the tribunal, which on March 31 upheld its commercial operational date (COD) claim for the first unit of 660 MW to be March 31, 2013, thus paving way for the UMPP to recover dues of about R1,050 crore from the procurers.

Rejecting the UMPP’s claim that all the procurers had actually and unequivocally waived the requirement of 95% of contracted capacity demand and the waiver is a right granted by the Contract Act, Justice Nariman, penning down the judgment for the Bench, said “even if a waiver is claimed of some of the provisions of the PPA, such waiver, if it affects tariffs that are ultimately payable by the consumer, would necessarily affect public interest and would have to pass muster of the Commission under Sections 61 to 63 of the Electricity Act. This is for the reason that what is adopted by the Commission under Section 63 is only a tariff obtained by competitive bidding in conformity with guidelines issued”.

“If at any subsequent point of time such tariff is increased, which increase is outside the four corners of the PPA,…the legislative intent and the language of Sections 61 and 62 make it clear that the Commission alone can accept such amended tariff as it would impact consumer interest and, therefore, public interest,” he added.

The Sasan UMPP is an integrated power plant cum coal mining project at a single location, involving an investment of over R27,000 crore.

The state utilities had argued that that as per the terms of the PPAs, the condition of successful performance test of a generating unit is when it acheives 95% of the contracted capacity of 620 MW on a sustained and continuous running of the unit for 72 hours. They further said Sasan had declared the COD on the “flawed performance test and certificate” and the declaration of the COD on March 31, 2013, was done by Sasan with a malafide intention of making unlawful gain in exhausting the low first-year tariff in one day and claiming higher second year tariff with effect from April 1, 2014, instead of the low first-year tariff from 2013-14.

“Sasan had obviously not fulfilled the condition for declaring the commercial operation of Unit No. 3 with the performance test undertaken at 101.38 MW (approximately 15%) as against the requirement to establish the achievement of 589 MW being 95% of the contracted capacity of 620.4 MW,” Ajmer Vidyut Nigam Ltd stated, adding that there could be no waiver unless it was expressed in writing by the authorised representative.

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