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Gujarat to seek SC stamp on rescue plan for Tata, Adani, Essar power plants  2 Months ago

Source:   Times Of India  

NEW DELHI: The Gujarat government and its discom, Gujarat Urja Vikas Nigam Ltd, will on Friday seek the Supreme Court’s consent for implementing a plan allowing the Tata, Adani and Essar groups to pass on increased fuel costs of their imported coal-based power stations in the state that have been doddering under mounting losses as consumer states refused to pay higher tariffs.

The move follows the plan proposed last month by a panel under former SC judge, Justice RK Agrawal. The state government had set up the panel to suggest ways to pull the three power plants in question -- with combined PPAs (power purchase agreements) for over 8,000 MW and outstanding debts in excess of Rs 22,000 crore -- back from the financial brink.

The recommendation of the panel, with former RBI deputy governor SS Mundra and retired Central Electricity Regulatory Commission chairman Pramod Kumar Deo as members, has the potential to give consumers in Gujarat, Maharashtra, Rajasthan, Punjab and Haryana tariff shock by putting an estimated combined burden of Rs 1.29 lakh crore over 30 years.

The panel has also suggested extension of PPAs and haircut by lenders, which could result in an estimated hit of Rs 18,000 crore for them. Besides, a sharply depreciated rupee will make imported coal even costlier and put additional burden on consumers.

No wonder the state government is playing safe by seeking SC’s consent since the court had in April last year struck down regulatory rulings allowing tariff hikes to compensate the promoters for increased fuel costs. Ruling in the case filed by the consumer states, the court had said power companies can’t raise preset tariffs if fuel becomes costlier due to changes in laws overseas.

Tata and Adani groups had wanted to pass on the difference in fuel costs after the Indonesian government issued new regulations in 2010 that raised coal price. Unable to sustain operations at full capacity due to ballooning debt, the promoters reduced supplies and last year offered to sell 51% stake in the projects for Re 1 to the Gujarat government. The state has PPAs for 4,800 MW from these projects.

After lenders sounded alarm bells, the Centre stepped in as facilitator. State-run NTPC conducted a technical study. But nothing came of this exercise.
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