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APR 08 2016

Tribunal nixes award of compensatory tariff to Adani Power, Tata Power

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 08th APR 2016

The Appellate Tribunal for Electricity (APTEL) on Thursday revoked the Central Electricity Regulatory Commission’s (CERC) 2014 decision to allow Adani Power and Tata Power tariff compensation for their plants run on coal imported from Indonesia, noting that the Commission did not have the powers to decide on the issue.

 However, APTEL directed the CERC to reconsider, within three months, the two power producers’ case for compensation under the force majeure provision as a consequence of Indonesia’s decision in 2011 to benchmark its coal prices to international rates.

 The case relates to Tata Power’s 4,000 MW plant and Adani Power’s 1,980 MW plant in Mundra, Gujarat, which were to run on low-cost coal from Indonesia.

 However, the Indonesian government’s decision in 2011to benchmark its coal export prices to international rates skewed the economics of the two plants.

 The APTEL judgement recognises the two companies’ plea that they be compensated under the force majeure clause of the power purchase agreements owing to the change in Indonesian regulations on coal prices.

 That recognition, however, counts as only a minor positive for the two companies from the judgment in the dispute that has now stretched over three years.

 Adani Power and Tata Power have been fighting for compensation since 2012. Although the CERC had in 2013 rejected the plea, a year later it agreed to give 52 paise per unit as compensatory tariff to Tata Power’s project and 41 paise per unit to Adani’s project. This was contested by the power procurers.

 Unlike compensatory tariff, which would have come with greater certainty, compensation under the force majeure provision will apply only until the changed conditions are in force.

 Ashok Khurana, Director-General of the Association of Power Producers, said, “With this order, the process seems to be moving into a decisive and positive phase where a final outcome can be expected soon. The force majeure situation provides both procurers and generators greater flexibility in reaching an agreed way forward with necessary oversights.”

 Tata Power’s shares fell to an intraday low of Rs. 60.60, down 9 per cent from the previous day’s close. It closed the day 3.83 per cent lower, at Rs. 64.1. Adani Power’s shares closed the day 2.92 per cent lower, at Rs. 33.2.


Adani Enterprise Limited Gujarat Adani Power Ltd Central Electricity Regulatory Commission Coal Tariff Indonesia Electricity Regulatory Commission Appellate Tribunal for Electricity Power Tata Power Electricity

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