ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Raising the ‘Bar’ for India’s Power Sector

Two prominent infrastructure companies belonging to Adani Group and Tata Group had sought the assistance of electricity regulators to hike the rate at which they sold power to several state power utility and distribution companies. They claimed that compensatory tariffs to the tune of nearly ₹8,000 crore were due to them as they had to absorb an increase in the price of coal imported from Indonesia used to fuel their power plants. But this was denied to them by the Supreme Court.

 

India’s high-flying industrialists are not used to having their pockets picked. Yet India’s apex court appears to have done just that, in the most honourable manner, one might add. Justices Pinaki Chandra Ghose and Rohinton Nariman of the Supreme Court, in a recent order, have produced a sterling judgment with far reaching consequences for two major private corporate players in India’s power sector—companies in the Adani Group and Tata Group—as well as for the future governance of the power sector. The judgment of the Supreme Court is expected to set a precedent for a number of similar cases currently being dealt with by various state-level electricity regulators across the country. As the Court order affects the operations of two of India’s three largest coal-fired thermal power plants, this moment offers an opportunity to re-evaluate the country’s long-term strategy to build large electricity generating capacities in an efficient, sustainable and inexpensive manner. It also offers an opportunity to take a relook at the various regulatory conundrums that the sector currently faces.

The 11 April Supreme Court order,1 which relates to a clutch of cases involving power generating subsidiaries of the Adani and Tata Groups, along with a number of other players in the power sector, has relieved two particular companies—Adani Power Limited and a subsidiary of Tata Power Limited, Coastal Gujarat Power Limited (CGPL)—of an estimated ₹4,300 crore and ₹3,600 crore respectively (Financial Express 2017) that they had nearly managed to secure as compensation for what they claimed was an unexpected rise in the price of coal imported from Indonesia. Tata Power (through CGPL) owns and operates a 4,000 megawatt (MW) “ultra mega power project” (UMPP) in the town of Mundra, Gujarat while Adani Power operates the 4,620 MW Mundra Power Plant, both located near the Mundra port in Gujarat. Both thermal power plants use Indonesian coal and both sell their power to several state power utility and distribution companies (discoms) in Maharashtra, Gujarat, Rajasthan, Punjab and Haryana. Both companies had argued that an increased cost in procuring high-quality coal from Indonesia merited an increase in the price charged by them; implying that the burden of this increased tariff would have fallen on the discoms, and finally, on the consumers.

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Updated On : 25th May, 2017

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