At least power will be generated and sold: AK Basu

There are two sides of the argument, whether Adani Power or any UMPP, which is dependent on imported coal, should be given compensatory package for tariff revision or not. Both are strong agruments. The projects were based on only one element - competitive bidding, and since it was a tariff-based project, developers took into account their cost, profit and other things and bid at a certain price. On that basis, Memorandum of Understanding (MoUs) were signed with users and it became a binding contract between the two parties.

The project based on imported coal received a setback when Indonesia and other countries decided to link coal prices in line with international prices. This made all the contracts go haywire. It went beyond the control of developers and became a vaild ground for tariff revision.

On the other side, the states distribution utilities's views are also justified. They are right in saying that they were given a commitment of supplying power at a particular price and there were no 'ifs and buts' at the time of signing the contract. So, it becomes a violation of contract for them. If I would have been at the place of Pramod Deo (the current CERC chairman), I would have given the same kind of order to balance the interests of both side.

If the recommendation goes through, of course, power would become costlier for some consumers. But it would make sure that at least power is generated and sold. No developer would like to incur losses every day and still generate power.

This was the only way to find a solution to this very sensitive issue. The committee, which will be set up to finalise the compensatory tariff, will have members from both the parties, who will sit together, argue both ways and come to a mutual solution which is most beneficial for the power sector. The committee will play a very important role in this. It is a forward looking order.

(The author is also on the board of Tata Power )

AK Basu

Former power secretary and ex-CERC chairman