Sense and Non-Sense in Power Tariffs
Force majeure is fine, but not over-invoicing
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.