Bench ruled that consumers should not bear the cost of any change in international regulations.
In a blow to the Tata Power and Adani Power, Supreme Court on Tuesday disallowed any relief to them in five-year-old contentious issue of compensation to their respective power plants.
Order sets a precedent for the power sector that tconsumers should not bear cost of any change in international regulations. At the same time, future of the power plants using the imported coal becomes bleaker.
Matter is realted to the Tata Power’s 4,000-Mw Ultra Mega Power Plant and Adani Power’s 1,980-Mw plant at Mundra, based on the imported coal, which is sourced from Indonesia.
Case was being fought between two companies and State utilities of Gujarat, Rajasthan, Maharashtra, Punjab and Haryana. The issue pertains to the pass-through of cost escalation because of the changes in the imported coal prices and the regulations in Indonesian Coal Market.
In accordance with directions of Appellate Tribunal of Electricity (Aptel) and SC, the Central Electricity Regulatory Commission (CERC) computed relief for two companies, in a December 2016 order.
But SC set aside judgment of both Aptel and CERC, quashing any relief. It has directed CERC to “go into the matter afresh and determine what relief should be granted to those power generators who fall within Clause 13 of the PPA as has been held by us in this judgment”.
Clause 13 of power-purchase agreement pertains to change in the regulations under Indian conditions. Tata and Adani were contesting for a change in rates under the international regulations; thereby judgment leaves very little room for relief for the two, staed Power Sector Experts.
Apex Court has recognised change in the regulations under the Indian conditions, fuel charge included.
Experts also added that, “Projects might become unviable for both the companies.
“Project was unviable from Day 1, given the risk of the dependence on coal from Indonesia and foreign exchange fluctuation. But these aspects were discounted by investors hoping a positive order,” stated Analyst.
|TIMELINE: 5 years and back to nothing|
|2008: Adani Power’s 1,980 Mw project in Mundra commissioned|
|2012: Tata Power 4,000 Mw UMPP commissioned. It won bid in 2007|
|2010: The Indonesian energy regulations change coal benchmark price in 2010, leading to escalation of fuel cost|
|2012: Adani and Tata approach CERC asking for relief from increased coal prices and other allied costs|
|Feb 2014: CERC comes out with compensatory tariff of 52 paisa/unit for Tata and 41 paisa/unit for Adani. APTEL also upholds decision allowing the companies to charge higher tariffs|
|Aug 2014: State govts procuring power approach Supreme Court contesting it. SC asks APTEL to expedite the matter|
|May 2016: APTEL asks CERC to compute compensation for Tata & Adani as per provisions of their respective PPAs|
|Dec 2016: CERC allowed Tata & Adani to charge the additional cost of coal from the states, disallowed other costs|
|11 Apr 2017: SC denies Tata & Adani to charge any compensatory tariff|