Power prices: Users in five states to bear cost of Mundra compensation

CERC rules for a higher rate to compensate for the higher cost of imported Indonesian coal, on which Mundra runs

Consumers in five states, including Maharashtra, will have to foot higher electricity bills once the Central Electricity Regulatory Commission (CERC)’s order providing relief for Tata Power’s Mundra plant gets implemented.

CERC has ruled for a higher rate to compensate for the higher cost of imported Indonesian coal, on which Mundra runs. The sector regulator allowed Tata a compensatory rate of 52 paise a unit of power for the 4,000-Mw plant in Gujarat’s Kutch district.

A spokesperson of MahaVitaran, Maharashtra’s power distribution company, told PTI, “We are studying the order, after which we will decide the future course of action.”

A MahaVitaran official told Business Standard: “We have a power purchase agreement with Coastal Gujarat Power (CGPL), an arm of Tata Power, for 25 years at a levelised Rs 2.26 a unit. However, after adding the CERC index for imported coal, this comes to Rs 2.45-2.50 a unit. With the addition of the compensatory rate, the Mundra power will cost Rs 3 a unit. The rise being a pass-through under the provisions of the Electricity Act 2003, it will be recovered from consumers.” Those below the poverty line and consuming less than 100 units would not be hit by the increased prices.

MahaVitaran buys 800 Mw of power from Mundra and its additional cost for this would now be Rs 300 crore annually.

Discoms in Gujarat, Rajasthan, Haryana and Punjab could not be immediately contacted. Like with Maharashtra, CGPL, implementing the Mundra project, has agreements with these four states, too, for selling power from the plant at Rs 2.26 a unit.  In a separate order, CERC granted nearly Rs 830 crore compensation for Adani Power’s 4,620-Mw Mundra plant. Gujarat has to pay Rs 420.24 crore, while Haryana has to shell out Rs 409.51 crore as compensation from the commissioning date till March 31, 2013, the order said.

Power producers laud order
The Association of Power Producers (APP) said the CERC's orders for the imported coal-based units of the two companies in Gujarat would go a long way in restoring the economics of such generation projects, beside reviving investors’ sentiment. Even with the proposed compensation, the resulting cost for these projects would be competitive compared to the rates arrived at through the recent bids for long-term power in Tamil Nadu, Rajasthan and Uttar Pradesh, it said.