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Gujarat govt's panel may bring Rs 1.29 bn relief to Tata, Adani and Essar

If the recommendations are implemented, the consumers will have to face the brunt of high power tariffs

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Gujarat Government  |  Gujarat  |  Essar Power

Press Trust of India  |  New Delhi 

Power Plants

The recommendations of a high-powered committee on stranded power projects set up by the government can bring a combined relief of Rs 1.29 billion for Tata, and Essar's power plants in the state over the next 30 years, according to a source.

If the recommendations are implemented, the consumers will have to face the brunt of high power tariffs.

A three-member committee comprising former Supreme Court judge Justice R K Agrawal, former RBI Deputy Governor S S Mundra and former Central Electricity Regulatory Commission (CERC) chairperson Pramod Deo was set up by the government on July 3, 2018 to find solutions for the three thermal power plants located in the state that were in financial distress.

The committee has "submitted its recommendations earlier this month and the three power plants would get a combined benefit of Rs 1.29 trillion in next 30 years if the recommendations are implemented", a source said.

"The bankers are already facing a stress of Rs 180 billion due to these plants. Besides, the consumers will face the brunt of higher power tariff in the states that inked with these plants..."

The panel's recommendations are measures to find a resolution to the losses suffered by the three identified power projects in -- 4,000 MW Coastal Gujarat Power Limited of Power, 4,620 MW at Mundra, Power Mundra Limited and 1,200 MW Gujarat Power Limited at Salaya.

The Supreme Court had ruled that these plants can not pass through the increase in cost of imported coal under change in law clause to consumer. The cost of coal had risen due to change in regulation in Indonesia.

The source said, "It is understood that the committee has recommended complete pass-through of fuel costs; extension of PPA (power purchase agreements) term and sacrifice by lenders. The resolution, if adopted, will burden the consumers with the risk of both increase in imported coal price as well as risk of Rupee-USD exchange rate variations for a period of over 30 years."


He further said, "The risk stands transferred from project developers to consumers and lenders, without any fault of theirs. The Rs 1.29 trillion benefit to power developers will burden the consumers in Gujarat, Haryana, Maharashtra, Punjab and Rajasthan."

In Gujarat alone, consumers will have to bear the burden of Rs 900 billion.

The issues causing hardship to these projects were deliberated at length within the legal and regulatory framework available in the country the CERC (Central Electricity Authority, APTEL (Appellate Tribunal for Electricity) and the Supreme Court. The final verdict was delivered in April 2017 wherein the apex court rejected compensation sought by these developers citing provisions of (PPAs); bidding guidelines and regulatory framework.

The source said "that the recommendations of the panel are clearly violative of judgment of the apex court and are aimed at providing a specific bailout to Tatas, Adanis and Ruias, at the cost of consumers".

Apart from the consumers, the public sector banks will incur losses of Rs 180 billion for erroneous decisions taken initially by the project sponsors and now by the high-powered committee, the source added.

The recommendations will be implemented through a directive to be given by the state governments to in the respective states.

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First Published: Thu, October 11 2018. 18:35 IST
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