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CERC for relief package to Adani Power's Mundra project

Last Updated: Wednesday, April 3, 2013 - 15:09

New Delhi: Power sector regulator CERC has said Adani Power should be granted "compensation" package for its Mundra project which would provide a cushion against the escalation in cost of imported coal for the plant.

The company had approached the Central Electricity Regulatory Commission (CERC) last year, seeking revision in tariff from its 1,980-MW Mundra project in Gujarat saying increase in imported fuel cost.

CERC in its order has said that in order to offset increase in cost of imported coal, till the international price of the commodity is stabilised, the company should be provided with some relief.

"In the present case, the escalation in price of imported coal on account of Indonesian Regulation and non-availability of adequate fuel linkage from Coal India for the project of the petitioner (Adani Power) is a temporary phenomenon and is likely to be stabilised after some time," the order said.

"Therefore, the petitioner needs to be compensated for the intervening period with a compensation package over and above the tariff discovered through the competitive bidding," it added.

The compensation package will be called 'compensatory tariff' and it could be variable in nature in proportion with the hardship that the company is suffering on account of the unforeseen events, it said.

It had led to non-availability of coal linkage or increase in international coal price affecting the import of coal which has further impacted its performance under the PPAs (Power Purchase Agreements), the order said.

Accordingly, CERC has also directed constitution of a Committee consisting of the Principal Secretaries of the concerned states and CMDs of the concerned distribution companies, chairman of the Petitioner company or his nominee, an independent financial analyst and an eminent banker to recommend the compensatory tariff within a period of 1 month.

However, S Jayaraman, Member, CERC said in a dissenting note that renegotiation of tariff cannot be ordered when such tariff has been discovered through the International Competitive Bidding process.

"The renegotiation of tariff in such cases defeats the competitive bidding process. The company through its own economics decided to bid for non-escalable energy charges, presumably based on its mining interest in Indonesia," he said.

The petitioner (Adani Power) should have built in the escalation factor and the risk associated with sourcing coal from foreign countries to insulate it from any future adverse development, Jayaraman said.

He also said that the petitioner quoting non-escalable energy charges has assumed the commercial risks and to corner the award of contract and renegotiation should not be allowed as it would give an opportunity to the petitioner to pass on the "risks" he assumed to the "consumers".

He also pointed out that, "The aggressive and predatory bidding by the petitioner by not factoring in the market price of coal and carrying rupees exchange rates and not quoting the escalable energy charges has helped it in winning the bids."

He added that the petitioner (Adani Power) in the face of the Indonesian Regulations cannot renege on its commitment and seek restitutionary remedy in the form of additional tariff to offset the impact of Indonesian Regulations.

Jayaraman also noted that the company has signed PPAs for supply of 1,424 MW of power to the Haryana utilities against Phase IV which has the total capacity of 1,980 MW. The petitioner has been allocated coal linkage against 1,336 MW capacity.

"The petitioner has not committed supply of power against the surplus available capacity of 556 MW (1,980 MW-1,424 MW) and may sell the balance available power in the open market," he added.


First Published: Wednesday, April 3, 2013 - 15:09
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