The Gujarat government has decided to accept the recommendations of a high-power committee that proposes to provide “relief” to three imported coal-based power plants — owned by Tata Power, Adani Power and Essar Power — in the state by allowing them to increase tariffs.
When asked if it was true that the state government has given directions to increase the tariffs for the three power generators, Energy Minister Saurabh Patel told The Indian Express: “We have discussed it in the Cabinet, and decided to go ahead with it.”
Though Patel refused to elaborate on the recommendations made by the committee, he said the state government will be making “some minor changes”.
The decision from the Gujarat government comes as a relief for the three private power producers in Gujarat who have been in the bind after Supreme Court set aside an Appellate Tribunal for Electricity’s decision that allowed Adani Power and Tata Power to charge compensatory tariff against the increased cost of coal imported from Indonesia.
The Gujarat government had formed a three-member committee in July 2018, “to suggest an early resolution” to the issues faced by the three private power producers.
While Tata Power operates a 4,000-MW power plant at Mundra, Adani has a 4,620-MW plant at the same location in Kutch district. Essar Power has a 1,320-MW plant at Salaya near Jamnagar.
Meanwhile, Tata Power issued a statement welcoming the Gujarat government’s decision. “The company welcomes the resolution by the Government of Gujarat to accept the recommendations of the high-power committee in giving some relief to Mundra Ultra Mega Power Project that meets nearly 15 per cent of Gujarat’s requirement of power at a very reasonable cost. This relief will help Coastal Gujarat Power Ltd (a sister concern of Tata Power) to continue its operations to meet its obligations to all the five beneficiary states. Though the coal cost is now a pass-through, the company would continue to make losses due to rebate on financing cost and coal mines profit is being passed on to the beneficiary states,” it said.
Tata Power also said that it expects to get the consent of other four procurer states based on the recommendations of the high-power committee’s, and thereafter amendment the PPAs (power purchase agreements) so as to seek necessary approvals from the Central Electricity Regulatory Commission (CERC”.
“This positive step is in the interest of all stakeholders, including the end consumers, who get 24×7 reliable electricity supply from CGPL power plant. In case these projects were shut down, replacing such huge capacity with alternate sources from the market would not be feasible as the short-term market prices are not only much higher and volatile, the availability of power is uncertain. Also, establishing new imported/indigenous coal-based power plants would have significantly higher fixed and variable costs and high gestation period and hence, would not offer any solution to immediate power requirement,” the statement from Tata Power added.