The Supreme Court of India on 11 April 2017 rejected the Central Electricity Regulatory Commission's appeal of awarding compensatory power tariff to Adani Power Ltd and Tata Power Ltd.
The ruling was made by a bench of Justices Pinaki Chandra Ghose and Rohinton Nariman who cited that the compensatory tariff cannot be provided due to the rise in price of coal imported from Indonesia.
Following this ruling, both the companies witnessed a dip in their share prices by up to 18 per cent on BSE.
Hurdles faced by Tata Power
• Tata Power owns the 4000 MW mega power project through its subsidiary Coastal Gujarat Power Ltd.
• Presently, Tata Power is at a loss of Rs 47500 crore over the 25-year power purchase agreement period of the project.
• Earlier, Tata Power appealed Central Electricity Regulatory Commission and the Appellate Tribunal that if a compensatory tariff was not allowed, the project would lose Rs 1873 crore per year or Rs 47500 crore over the 25-year period.
• The company won the 4000 MW project through a bidding process coordinated by the public sector Power Finance Corporation in February 2006. It intended to run the power plant with coal procured from mines owned by the Tata group in Indonesia.
• But in 2010, the Indonesian government said that any export of Indonesian coal could be done only at prices linked to international prices. As a consequence, the project became unviable.
Hurdles faced by Adani Power
• The Adani group also set out building a 3960 MW coal-based power project at Mundra and entered into agreements with Gujarat and Haryana utilities at Rs 2.34 and Rs 2.94 a kWhr respectively.
• The coal was to come from Indian mines, but the Union Government in November 2008 changed the rules so that only 70 per cent of the needs of coast-based thermal power plants could be met from domestic mines and rest could be imported.
• For the purpose of importing coal, countries that were exporting it made it mandatory to link export prices to international prices.
What Happened Next?
Subsequently, both Tata Power and Adani Power appealed to the Central Electricity Regulatory Commission seeking a compensatory tariff under the Force Majure (Act of God) and ‘Change of Law’ provisions of the power purchase agreements.
The Commission in turn responded that neither Force Majure nor Change of Law was applicable in this case. However, it invoked Section 79 of the Electricity Act, 2003 under which it is empowered to fix tariffs and called for a committee to find out what tariff to fix for the two mega power projects.
After the constitution of committee, the power buyers (utilities) appealed to the Appellate Tribunal for Electricity (APTEL) against the Commission’s orders. The APTEL ruled that the Commission had no powers to fix tariffs. However, it said that Force Majure and Change of Law were applicable in this case.
Thereafter, the utilities went to the Supreme Court against this.
When: 11 April 2017
DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.
India, Maldives released Joint Statement
India's Statue of Unity visible from space: Commercial satellite network 'Planet'
Union Government, ADB sign loan agreements worth USD 574 million for various projects in India
Government approves 3 proposals under Nirbhaya Fund; 1023 Fast Track Courts to be set up