Sense and Non-Sense in Power Tar­iffs

Force ma­jeure is fine, but not over-in­voic­ing

The Economic Times - - Breaking Ideas -

It seems one step for­ward and two steps back in the pol­icy-chal­lenged power sec­tor. On the one hand, the Ap­pel­late Tri­bunal for Elec­tric­ity (Aptel) has up­held the prin­ci­ple of ‘force ma­jeure’ to al­low re­view of tar­iffs from the Mun­dra plants of Tata Power and Adani Power that use coal im­ported from In­done­sia. New im­posts on coal by In­done­sia that changed landed fuel prices at Mun­dra would have been be­yond the con­trol of the power pro­duc­ers, the Aptel rul­ing has rightly ob­served. On the other hand, the re­ported ex­ten­sive over-in­voic­ing of im­ported coal by sev­eral power pro­duc­ers, which is be­ing in­ves­ti­gated by the direc­torate of rev­enue in­tel­li­gence (DRI), sug­gests mas­sive cor­rup­tion, mis­gov­er­nance and the sheer lack of over­sight. A sys­temic over­haul is re­quired, with speed.

The Aptel judg­ment also re­it­er­ates the prin­ci­ple that power tar­iffs de­ter­mined via com­pet­i­tive bid­ding, like those for the Adani and Tata plants, can­not be re­vised by the Cen­tral Elec­tric­ity Reg­u­la­tory Com­mis­sion (CERC), the reg­u­la­tor, on the ba­sis of changes in In­done­sian law. Those reg­u­la­tory changes can, how­ever, in­vite the force ma­jeure clause, the tri­bunal has main­tained. The idea that com­pet­i­tively de­ter­mined tar­iffs are sacro­sanct save for force ma­jeure de­vel­op­ments or changes in In­dian law is, in­deed, wel­come. We need a sys­tem where ef­fi­cient power pro­duc­ers can drive down tar­iffs and, in the bar­gain, com­pet­i­tively seek cus­tom. Con­cur­rently, the po­lit­i­cal es­tab­lish­ment needs to shun reck­less un­bud­geted give­aways in power, and clamp down on theft and huge rev­enue leak­age in power dis­tri­bu­tion.

Mean­while, the Eco­nomic and Po­lit­i­cal Weekly re­ports that coal priced $40-50 a tonne was im­ported at prices over $82 per tonne in 2014-15. The DRI needs to con­clude in­ves­ti­ga­tions in a time-bound man­ner and fol­low through with charges. It points to sys­temic reg­u­la­tory la­cu­nas and the per­verse pol­icy rigidi­ties in the do­mes­tic coal — we still don’t al­low pri­vate sec­tor com­mer­cial min­ing of coal. Reg­u­la­tors can­not take claimed cost of fuel for granted and must ver­ify them be­fore fix­ing the tar­iff.

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