Tata Power is caught in a cleft stick with the Central Electricity Regulatory Commission (CERC) reviewing its demand for raising the tariff for electricity from its Mundra ultra mega power project to five state electricity boards. If the regulator refuses the hike, the company could suffer an annual revenue loss of R2,800-3,000 crore,which it fears could render the project unviable.
The regulator will hold the final hearing on the matter on Thursday amid opposition to tariff hike by the consumer states ? Gujarat, Rajasthan, Haryana, Punjab and Maharashtra.
The tariff hike demand was triggered by the increased cost of Indonesian coal, following a recent change in that country?s mining law.
In a letter written to the power ministry earlier, Tata Power had sought at least R1 per unit revision in the tariff quoted earlier (R2.26 per unit).
This, the company, argued, is needed to keep the UMPP viable.
States protest against any tariff hike as the plant was required to supply power at a fixed cost according to the power purchase agreement (PPA) signed by the developer. Tata Power, on the other hand, has submitted that the recent change in Indonesian mining law should be treated as an extraordinary situation which it could not have foreseen it at the time of bidding.
While hearing the petition earlier, the CERC had asked the developer to take recourse to the dispute resolution provisions of the PPA before seeking relief from the regulator. The regulator decided on this course after a dispute arose over whether Tata Power had complied with the PPA provisions.
Indonesia is most conveniently located to export coal to India, which is why several Indian power companies have acquired coal assets or tied up long-term coal supplies there.
But the Indonesian government?s recent move to change its mining law to bring coal price in line with the international market has sent fuel cost calculations of several power project developers haywire.
For the Mundra project, Coastal Gujarat Power (CGPL), the special purpose vehicle of Tata Power had tied up 3.28 million tonnes of coal from Indonesia at a discount. But its calculations have gone awry with Indonesian coal price rising by $40 a tonne. The private developer won the project through a tariff bidding route in 2006 by quoting 55% of the fuel cost as a non-escalable component and a levellised tariff of Rs 2.26 per unit.
About 15,000 MW capacity based on Indonesian coal is facing the prospect of default on coal supply commitment due to developers? inability to pass on increase in fuel cost to discoms, according to the Association of Power Producers.