Compensate Adani Power for high-cost coal imports: CERC
4 April 2013 3:36 AM GMT
Power sector watchdog Central Electricity Regulatory Commission (CERC) has said Adani Power should be granted a 'compensation' package for its Mundra project which would provide a cushion against the escalation in cost of imported coal for the plant. The company had approached the Central Electricity Regulatory Commission last year, seeking revision in tariff from its 1,980-MW Mundra project in Gujarat because of increase in imported fuel cost.
In its order, the Central Electricity Regulatory Commission has said that in order to offset increase in cost of imported coal, till the international price of the commodity is stabilised, the company should be provided with some relief.
'In the present case, the escalation in price of imported coal on account of Indonesian Regulation for the project of the petitioner (Adani Power) is a temporary phenomenon and is likely to be stabilised after some time,' the order said.
‘Therefore, the petitioner needs to be compensated for the intervening period with a compensation package over and above the tariff discovered through the competitive bidding,' it added. Â
The compensation package will be called 'compensatory tariff' and it could be variable in nature in proportion with the hardship that the company is suffering on account of the unforeseen events, it said.
It had led to non-availability of coal linkage or increase in international coal price affecting the import of coal which has further impacted its performance under the Power Purchase Agreements (PPAs), the order said. Accordingly, the Central Electricity Regulatory Commission has also directed constitution of a committee consisting of the principal secretaries of the concerned states and CMDs of the concerned distribution companies, chairman of the petitioner company or his nominee, an independent financial analyst and an eminent banker to recommend the compensatory tariff within a period of 1 month.
However, CERC Member S Jayaraman said in a dissenting note that renegotiation of tariff cannot be ordered when such tariff has been discovered through the International Competitive Bidding process.
‘The renegotiation of tariff in such cases defeats the competitive bidding process. The company through its own economics decided to bid for non-escalable energy charges, presumably based on its mining interest in Indonesia,' he said.
In its order, the Central Electricity Regulatory Commission has said that in order to offset increase in cost of imported coal, till the international price of the commodity is stabilised, the company should be provided with some relief.
'In the present case, the escalation in price of imported coal on account of Indonesian Regulation for the project of the petitioner (Adani Power) is a temporary phenomenon and is likely to be stabilised after some time,' the order said.
‘Therefore, the petitioner needs to be compensated for the intervening period with a compensation package over and above the tariff discovered through the competitive bidding,' it added. Â
The compensation package will be called 'compensatory tariff' and it could be variable in nature in proportion with the hardship that the company is suffering on account of the unforeseen events, it said.
It had led to non-availability of coal linkage or increase in international coal price affecting the import of coal which has further impacted its performance under the Power Purchase Agreements (PPAs), the order said. Accordingly, the Central Electricity Regulatory Commission has also directed constitution of a committee consisting of the principal secretaries of the concerned states and CMDs of the concerned distribution companies, chairman of the petitioner company or his nominee, an independent financial analyst and an eminent banker to recommend the compensatory tariff within a period of 1 month.
However, CERC Member S Jayaraman said in a dissenting note that renegotiation of tariff cannot be ordered when such tariff has been discovered through the International Competitive Bidding process.
‘The renegotiation of tariff in such cases defeats the competitive bidding process. The company through its own economics decided to bid for non-escalable energy charges, presumably based on its mining interest in Indonesia,' he said.
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