Haryana, Punjab oppose tariff hike

In a setback for mega power projects of the Tata and Adani groups, Haryana and Punjab governments have seriously questioned before the Central Electricity Regulatory Commission (CERC) move to hike power tariff based on the report of the Deepak Parekh Committee.

Already the Maharashtra government has decided to take a legal opinion from the Comptroller and Auditor-General or the Central Vigilance Commission before implementing another report that has recommended a hike in tariff.

The latest move by Haryana and Punjab is likely to have an adverse impact on tariff revision for the 4,000-MW Mundra ultra mega power project of Tata Power and the 4,620-MW mega power project of Adani Power also at Mundra, Gujarat. Both projects have a huge component of imported coal and they have filed a petition before the CERC for tariff revision citing a massive rise in costs of coal being imported from abroad.

Maharashtra’s power distribution arm, MahaVitaran, in its report on the Parekh Committee order, had indicated that it would have to bear an additional burden of Rs. 300 crore annually if the compensatory tariff of 56 paise for the Mundra ultra mega power project (UMPP) is accepted. The state-run firm is drawing 800 MW from the Mundra UMPP. MahaVitaran, in its recent representation to the 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 under recovery of the fixed charges with ROE is 48 paise a unit and 13 paise a unit without ROE. MahaVitaran called for a 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 future,” MahaVitaran had stated.

The CERC had on September 13 asked the States buying power from the two Mundra projects to respond to a tariff hike recommendation made by a panel headed by Deepak Parekh. The Parekh committee recommended a compensatory tariff of 45-55 paise per unit for Tata Power’s Mundra UMPP and up to 60 paise per unit for Adani Power’s plant in the same area.

Will pose additional burden: affidavit

In its affidavit filed with the CERC, the Punjab government has stated that any raise in tariff on power from the Mundra project would lead to an additional burden on consumers, while Haryana has said it will not purchase power from the project if tariffs are raised. Punjab has impressed upon the CERC to dispose of Tata Power’s petition as the revision would amount to tampering with the sanctity of legal power purchase agreements signed between the State and the company in 2007.

The affidavit filed by Haryana before the CERC has contended that if the cost of power from the Tata project became prohibitive due to increase in the price of Indonesia coal or devaluation of rupee, there will be an unconditional option for Haryana utilities to decide on non-procurement. In such a case, procurement of power from the Tata project will not be binding on the Haryana utilities. Further, the State has stated that it will pay additional tariff only from the date of the CERC final order and not retrospectively.

The case is not different for Adani Power which had filed a petition in the CERC seeking an increase in tariff to compensate for the increased cost of imported coal from Indonesia due to revised regulations in that country.

The company had sought a tariff hike on the lines of Tata Power but the opposition from Haryana is likely to delay any kind of price revision.

In fact, Haryana has stated that it will keep its option open on challenging the CERC order in Appellate Tribunal.

  • Punjab says any further hike will put additional burden on consumers

  • Haryana cites non-procurement option if power cost became prohibitive

  • Tata Power, Adani Power have moved CERC for tariff revision citing rise in cost of imported coal