New Delhi: The state electricity regulatory commissions of Rajasthan and Maharashtra have approved compensatory tariff for Adani Power’s Kawai and Tiroda power plants to help the developer recover additional costs of fuel procured from the open market to make up for a reduction in supplies by Coal India Limited (CIL) following the 2013 Cabinet decision.
Meanwhile, a panel headed by a former Supreme Court judge R.K. Agarwal was set up this week to find ways to resolve issues that have forced Indonesian coal-based power plants of Adani, Tata and Essar in Gujarat to temporarily scale down generation.
The panel, which also includes former RBI deputy governor S.S. Mundra and ex-central electricity regulatory commission chairman Pramod Deo, has been asked to submit its recommendations within two months.
Adani Power has written off entire receivables of over Rs 4,300 crore booked by it on account of compensatory tariff for the Mundra project after an adverse Supreme Court judgement in April last year. The company’s unpaid debt currently stands at over Rs 40,000 crore, a big chunk of which is owed by the Mundra plant.
The regulatory commissions have pronounced orders on the basis of the Supreme Court’s verdict in the matter of compensatory tariff for Tata Power’s and Adani Power’s Mundra power plants, which both run on Indonesian coal. The Indonesian government switched over to international market indices-based pricing in October 2011, upsetting the fuel cost calculations of Mundra and other power plants using imported coal.
Under Indonesian law, coal exporters can be sent to jail if they are found selling coal below the benchmarked price.
While the apex court had, in its judgement, ruled that plants using Indonesian coal cannot claim additional fuel costs as change in a foreign country’s law won’t qualify as a force majeure condition as per contractual terms, it, nevertheless, held that reduction in domestic coal supplies by CIL amounts to a change in law as new coal distribution policy of 2007 stipulated 100% fuel supply by CIL and its subsidiaries. Hence, affected plants are eligible to seek compensation, the top court said.
Adani’s Kawai and Tiroda plants have recently started receiving domestic coal from February and April this year, respectively, after implementation of the Shakti scheme by the Central government.
The Lohara West Extension coal block of the Wardha Valley coalfield was allocated to the Tiroda plant in 2007. But, the environment ministry cancelled the allotment later, when it turned out that the mine fell under the wildlife corridor for a tiger reserve.
The Kawai power plant was erected on the basis of a memorandum of understanding between Adani Power and Rajasthan, where the state assured support to get coal linkage from the Central government.
The Cabinet Committee on Economic Affairs’s June 2013 decision stipulated for CIL to sign fuel supply agreements with plants worth 78,000 MW that were due for commissioning by end of March 2015.
As per the CCEA decision, CIL committed domestic coal supply to the tune of 65%, 65%, 67% and 75% of the annual contracted quantity in the last four years of the twelfth five-year plan in the FSAs. That necessitated amending the NCDP 2007.