In a landmark judgment, the Supreme Court has said the point of measuring the calorific value of coal for power plants would be the project site. This would imply that the cost of washing coal could be included in the energy charge component of power tariff. The issue came up during a hearing on a dispute involving Larsen & Toubro (L&T) and the Punjab government. The court also asked the state to pay Rs 1,125 crore to L&T for its 1,400 Mw power plant at Nabha. The dispute arose after the state rejected costs incurred by the company for washing and transportation of coal. The apex court has asked the state to remit the money within three months, failing which the state would have to pay an interest of 12 per cent, additionally. L&T Power Development Ltd bagged the project in 2009. It took over Nabha Power Ltd, a special purpose vehicle created by the Punjab State Electricity Board. In January 2010, the two sides signed a share purchase agreement.
The plant was fully operational in FY15, but the dispute led to L&T looking at selling it off.While Punjab State Power Corporation contended that the quoted tariff on which L&T won the bid was all inclusive and no exclusion was to be allowed, the court held that “the formula for energy charge was designed in such a manner that it would be influenced by the actual cost of coal”. When contacted, Hemant Kumar, group general counsel, L&T, said justice had finally been done. He, however, declined to comment further in the matter. The Punjab State Electricity Regulatory Commission and the appellate tribunal for power, APTEL, had earlier rejected costs claimed by L&T. The order said washed coal was “a necessity” for the project as a quality requirement for the formula envisaging the requisite quality of coal to be obtained at the project site, and this included all the relevant costs up to that quality. “The mere term ‘coal’, therefore, would have to mean ‘washed’ coal, as no other type of coal could be used in the matter at hand,” the court held. On the issue of delivery cost, the court ordered that the transportation costs to the project site have to be compensated to the appellant. “It is really the transportation cost from point to point which would be involved and the mere mention in RFP under project related activity/milestone about railway siding and the railway lines from nearby station cannot imply that the railways is the only mode of transportation when the siding has not been made, albeit on account of land acquisition problems,” it said. Under the bid document, the source of primary fuel was coal from the South Eastern Coalfields Ltd. The railways had also given an assurance for transportation of coal from SECL over a distance of 1,600 km. The company, however, had to incur coal-washing cost as well as use trucks for transportation.