Parekh committee's proposal would create additional burden: MahaVitaran

MahaVitaran said that it might explore an option of approaching the Appellate Tribunal for Electricity against compensatory tariff

Maharashtra’s power distribution arm, MahaVitaran has indicated that it would have to bear an additional burden of Rs 300 crore annually if the compensatory tariff of 56 paise suggested by the Deepak Parekh committee for the Mundra ultra mega power project  (UMPP) is accepted. MahaVitaran is drawing 800 Mw from the Mundra UMPP.

MahaVitaran, in its recent representation to the Central Electricity Regulatory Commission (CERC), had argued that Coastal Gujarat Power Ltd (CGPL), an arm of Tata Power, was earning a return on equity (ROE) of 35 paise a unit. The underrecovery of the fixed charges with ROE is 48 paise a unit and 13 paise a unit without ROE. MahaVitaran called for cut in the ROE by CGPL .

“There is a need to conduct a rigorous analysis to confirm that today's loss is not going to be made up by profits in the future,” MahaVitaran said. “As a procurer, we are of the view that every party in the deal must come forward to make sacrifices to reduce the impact of the compensatory tariff. To this end, the bankers must step forward to cut interest rates that should be passed on to the procurers,” MahaVitaran said.

According to MahaVitaran, CERC needs to determine the additional compensatory charge every year, which would be passed on to the procurers. Further, the respective state electricity regulatory commissions need to approve such expenditure on account of the additional compensatory charge in the annual revenue requirement of procurers. MahaVitaran also emphasised the need to suitably incorporate a clause to enable procurers to call for renegotiations in case the project becomes unviable to the procurer. Moreover, MahaVitaran has sought clarity from CERC on the recovery period of the compensatory tariff, along with the billing mechanism.

MahaVitaran said that it might explore an option of approaching the Appellate Tribunal for Electricity against the compensatory tariff. It would seek necessary approval for the same from the Maharashtra cabinet. The Parekh committee was set up by CERC in April this year to work out the quantum of “compensation” over the current tariff of the Mundra UMPP due to the impact of “unanticipated” increase in price of imported coal.

The committee had suggested adjusting the compensation in line with global prices and the benefits earned from the overseas mines owned by companies. According to the committee’s recommendation, the tariff for the projects was to be reviewed every quarter.

The panel had also suggested imposing a ceiling on the compensatory tariff. It also floated the idea of third-party sale of power beyond the normative availability.