SC floats lifesaver for 3 power projects
NEWDELHI: The Supreme Court on Monday offered a ray of hope to three troubled power projects run by Adani Power, Tata Power and Essar Power by directing the apex electricity regulator to decide on changes to power purchase agreements (PPAs).
The court asked the Central Electricity Regulatory Commission (Cerc) to submit in eight weeks its decision on changes to the PPAs the three Gujarat-based power producers have signed with distribution companies to reflect the higher cost of imported coal.
While the verdict effectively paves the way for renegotiation of power tariffs, the top court also allowed Energy Watchdog, a consumer rights group, to raise objections to any amendments before Cerc. Power distribution companies in Maharashtra, Rajasthan, Punjab and Haryana have signed PPAs with the three power producers.
With the power producers seeking an increase in tariffs to compensate them for losses because of higher cost of imported coal, a two-judge bench headed by justice Rohinton F. Nariman asked the regulator to decide on all issues related to PPA amendments.
The companies had cited a change in Indonesian rules in 2010 as a force majeure event that raised the cost of coal imported from that country to fuel their electricity plants.
In April 2017, the Supreme Court set aside a 2016 order of the Appellate Tribunal for Electricity (Aptel) that allowed Adani Power and Tata Power to charge the so-called compensatory tariffs.
Experts said the verdict would help revive power projects.
“It’s an opportunity for the regulator to balance the interests of all stakeholders, including customers, promoters and lenders, be pragmatic and ensure that capital assets built are utilized rightfully. It can pave the way for resolution of stranded assets in the sector,” said Sambitosh Mohapatra, partner, power and utilities, PwC India.
Capacity of around 66 gigawatt (GW) in India is facing various degrees of financial stress. This includes 54.8GW of coal-based power assets, 6.83GW of gasbased assets and 4.57GW of hydropower assets.
The order on Monday came following recommendations of a committee constituted by the Gujarat government and chaired by former Supreme Court judge Justice R.K. Agrawal to look into the possibility of “contribution by each stakeholder, including banks, project developers and procurers, by way of concessions for mitigating hardship”.
The panel noted that coalbased power projects needed to be salvaged and allowed to pass the impact of high fuel costs equitably to consumers, lenders and other stakeholders.
Maulik Pathak in Ahmedabad contributed to this story.
CERC ASKED TO DECIDE ON REVISED TARIFFS FOR TATA, ADANI, ESSAR POWER IN GUJARAT