DRI probe may affect Rs 800-crore relief to Adani

The DRI alleged at least 40 power generating firms imported Indonesian coal directly from ports in that country to India while import invoices were routed through one or more intermediaries based in Singapore, Hong Kong, Dubai and British Virgin Islands to artificially inflate its value.

Written by Khushboo Narayan | Mumbai | Updated: November 30, 2017 8:10 am
Adani, Adani power case, Gautam Adani While the agency is yet to issue show-cause notices to Adani Group firms, it alleged that money was being “siphoned” outside the country (Express File Photo/Anil Sharma)

The top electricity regulator has said that findings of the Directorate of Revenue Intelligence (DRI) in the probe into alleged over-invoicing of Indonesian coal imports by Adani Power Ltd will affect the compensation it received from discoms in Haryana.

The Central Electricity Regulatory Commission (CERC) had allowed an interim compensation of about Rs 800 crore to Adani Power from Uttar Haryana Bijli Vitran Nigam Ltd and Dakshin Haryana Bijli Vitran Nigam Ltd for supply of power since 2013 “by arranging coal from alternative sources” — importing from Indonesia.

The compensation was allowed after Adani Power sought increased tariff revenue citing “financial difficulties” in arranging “working capital”.

However, the electricity regulator put two conditions. One, it may revisit the compensation if DRI submits its findings to the CERC and, two, the compensation will be subject to adjustment on final determination of relief on the compensatory tariff issue.

“We are of the view that any finding by DRI against Adani Power would have impact on the coal imported by Adani in lieu of the shortfall in the domestic coal for which interim relief is granted in this order. Accordingly, if any such case is brought to the notice of the Commission by DRI, it will open to the Commission to revisit the relief…” said the CERC order passed by Gireesh B Pradhan, chairperson, and its three members on September 28.

The DRI is probing at least 40 companies including five firms of Adani Group including Adani Power for alleged overvaluation of coal imports from Indonesia pegged at Rs 29,000 crore from 2010 on.

While the agency is yet to issue show-cause notices to Adani Group firms, it alleged that money was being “siphoned” outside the country and the electricity-generating firms were availing of “higher tariff compensation based on artificially inflated cost of the imported coal”.

In March 2016, the DRI issued a general alert to its field formations across India, outlining this modus operandi of over-invoicing of coal imports from Indonesia.

In an email response to a detailed query sent by The Indian Express, Hasmukh Adhia, former Revenue Secretary and the current Finance Secretary said, the DRI will share the details of its probe with the CERC and the state electricity regulatory commission once the adjudication process is finalised.

“In case of the show-cause notice issued by DRI in the cases of over-valuation of imports by Adani Group, the DRI Adjudicating Authority had dropped the proceedings on August 22, 2017. However, as per the procedure for review of Orders of the Adjudication Authority, a Committee comprising of 2 Chief Commissioners of Customs has reviewed this Order of Adjudicating Authority and directed the Commissioner of Customs vide their Order dated November 15, 2017 to file an appeal in the tribunal, which would be done before December 14, 2017. Once the Adjudicating process reaches finality, then only DRI will be in a position to inform CERC and SERC,” said Adhia.

An email and phone calls to the official spokesperson of Adani Group did not elicit any response.

In April, the Supreme Court had set aside an earlier CERC ruling that allowed power producers to charge compensatory tariff from consumers. It also directed the CERC to consider the matter afresh keeping in mind the government’s revised coal allotment and power tariff guidelines.

The CERC had in 2013 awarded compensatory power tariff to Tata Power Co Ltd and Adani Power, because of a rise in price of coal imported from Indonesia. The companies had cited a change in Indonesian rules in 2010 as a force majeure event that raised the cost of coal imported from that country to fuel their electricity plants in Mundra.

The compensatory tariff allowed to both Tata Power and Adani Power was Rs 2,300 crore and Rs 3,600 crore respectively till March 2016.

The Supreme Court, however, ruled that “an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took” .

The DRI alleged at least 40 power generating firms imported Indonesian coal directly from ports in that country to India while import invoices were routed through one or more intermediaries based in Singapore, Hong Kong, Dubai and British Virgin Islands to artificially inflate its value.

The DRI alleged that in certain cases, the import value of Indonesian coal was artificially inflated by about 50 to 100 per cent by changing test reports which measure the calorific value of coal.

The CERC order assumes significance as, typically, the power tariff is regulated based on the costing data provided by the power generator. According to regulations, the tariff factors in capacity charges and energy charges. The capacity charges are fixed annually based on various factors. The energy charges are the cost of primary and secondary fuel used to generate power.

Artificial inflation of value of the imported coal increases the landed cost of coal, which is a primary fuel in coal-fired thermal power plants. The higher tariff dispensed by the regulator to the power generator enhances the cost of purchase of the power distributor which, in turn, factors this artificially enhanced cost in its billing to consumers.

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