CERC seeks pre-bid papers on Mundra plant

Tata Power pleads for application of force majeure clause due to Indonesia's new coal pricing regulations

The Central Electricity Regulatory Commission (CERC), which is hearing Tata Power’s petition seeking higher tariff for electricity generated from its Mundra plant, has asked the Power Finance Corporation (PFC) to file pre-bid conference documents.

“The next hearing on the matter is slated for January 30,” a CERC official told Business Standard.

Tata Power (Coastal Gujarat Power Ltd) had filed the petition seeking higher tariff for electricity from its Mundra plant. This was because the price of coal that it uses in the plant comes from Indonesia, which recently increased its coal prices, thus causing losses for the company which it hoped would be mitigated by increasing tariff.

Tata Power had filed the petition under Sections 61, 63 and 79 of the Electricity Act, 2003. It had raised the legal claims on the grounds of change in law, under force majeure.

CERC gave its directions after the Gujarat Urja Vikas Nigam, the Punjab State Power Corporation and the Prayas Energy Group argued that Tata Power’s contention of the qualification in India in the definition of law applies only to electricity law and not to all laws is not correct.

The Gujarat Urja Vikas Nigam has opposed Tata Power’s pleas. “The event of increase in price of Indonesian coal cannot be said to be an event of ‘force majeure’ affecting the Mundra project. The terms ‘law’ and ‘change in law’ relate to Indian law and not to any law outside India. Therefore, the laws of Indonesia cannot be part of the definition of law. The bidding documents cannot be possibly concerned with laws all over the world and it would lead to impossibility of implementation,” the company said.

The Punjab State Power Corporation argued that the increase in the price of coal by the Indonesian government was a post-tender development which could not alter the terms and conditions under which the bid was submitted by Tata Power. “The company has exaggerated the issue of escalation in price of coal,” it said.

The Prayas Energy Group said if the tariff was permitted to be re-determined or reconsidered because of the financial issues faced by one particular project, there might be similar demands from other project developers. In future, a bidder may take undue risks to eliminate other bidders who might be more conservative in their strategy and later on, pass on all these costs to consumers.