Relief to Tata Power, Adani as SC allows rejig of Mundra project PPA
30 October 2018
The Supreme Court on Monday allowed state discoms and power producers move CPEC to amend PPA, offering a big relief to Adani Group and Tata Power, but raising the prospects of higher power costs for consumers at least in the five states of Gujarat, Haryana, Maharashtra, Punjab and Rajasthan.
State discoms and power producers can now move Central Electricity Regulatory Commission to seek amendments to power purchase agreement (PPA) as per the recommendations made by a high-powered committee.
The apex court has given two weeks time to the stakeholders.
With the go-ahead from the Supreme Court to discoms and stressed power companies, Adani group and Tata Power are expected to appeal for amendment in power purchasing agreement (PPA) of Mundra projects. If the Central Electricity Regulatory Commission (CPEC) also agrees to the recommendations made by a high-powered panel, this would result in higher power tariffs for the consumers.
If the CPEC implements the recommendations made by the panel, electricity prices will go up in Gujarat, Haryana, Maharashtra, Punjab and Rajasthan.
The Supreme Court, however, said the consumers can also challenge the higher power tariff as per the law.
High input costs, especially the high cost of imported coal had rendered the 4,000 MW Coastal Gujarat Power Limited of Tata Power, 4,620 MW at Mundra, Adani Power Mundra Limited and 1,200 MW Essar Power Gujarat Power Limited at Salaya stressed power projects.
Stressed power projects have resulted in an accumulation of bad loans with According to news agency PTI, bankers are facing a stress of Rs18,000 crore due to power plants set up by Adani, Tata Power and Essar Power in Gujarat.
The Gujarat government had formed a three-member high-power panel under former Supreme Court Justice R K Agrawal, former RBI deputy governor S S Mundra and former chairman of Central Electricity Regulatory Commission Pramod Deo, to explore the legal and commercial options of the stressed power projects.
The panel recommended passing the burden of high fuel price to consumers, extension of the PPAs and haircuts on loan repayments to lenders.
The Supreme Court had earlier ruled that the companies cannot raise tariff from what was negotiated in the PPA while setting up these projects in Gujarat. The companies cited ‘act of god’ to raise power tariffs as they suffered due to higher coal prices after Indonesia imposed regulation.