India's power regulator is expected to take a call soon on the demand for increase in contracted tariffs for plants with a combined capacity of 15,000 mw, a development that is likely to set the agenda for the other ailing companies in the sector.
The Central Electricity Regulatory Commission (CERC) is expected to pass an order on the appeals of Tata PowerBSE -0.36 % and Adani group soon, and start hearing next week petitions by Reliance Power. While these producers are seeking tariffs higher than the contracted Rs 1.20-2.96 per unit, Essar and Shapoorji Pallonji groups have threatened to terminate their power supply pacts with Gujarat. State utilities, on the other hand, are demanding enforcement of contracts for cheap supplies over the next 25 years.
Producers have cited increased costs due to more expensive imported coal to justify their demand, but industry analysts say the matter is unlikely to be resolved soon. "Tata Power and Adani PowerBSE 3.02 % have been struggling to get higher tariff for the past 18 months. But no outcome is expected in the foreseeable future since the matter will move to appellate and Supreme Court," said Sambitosh Mohapatra, partner at consulting firm PwC, adding that the direction for the power sector will become clear only after two-three years when at least one case is finally settled. The growth of the sector has been held up because investors rushed to grab assets with aggressive bids while hardly any state utility is coming forward for a tie-up with any producer for long-term power supplies, Mohapatra said.
Reliance PowerBSE 1.93 %, which has a total capacity of over 8,000 mw being built with an investment o fRs 37,450 crore at Krishnapatnam and Sasan, has filed two petitions before the regulator. Tata Power is seeking higher tariff from five state utilities that will procure electricity from its ultra mega power project. The company is investing Rs 17,000 crore in upcoming imported coal-fired 4,000 mw project at Mundra. In the neighbouring Kutch district, Adani Power is waiting for the outcome of its battle with state utilities of Gujarat and Haryana for imported coal-fired 2,424 mw capacity installed at an investment of Rs 10,000 crore.
Except for the Sasan project, all the projects are banking on imported coal, largely from Indonesia, where the government has raised prices of the commodity. "We are increasingly getting dependent on unpredictable imports of coal instead of tapping indigenous resources. India opted for ultra mega power projects to achieve economy of scale but ended up creating mega mess in power sector as we neglected domestic coal production," said former power minister YK Alagh, expressed concerns over ailing power utilities banking on imported coal to meet electricity demand even during off-peak hours.
Earlier, JSW EnergyBSE 3.22 % had also sought higher tariff from Maharashtra's power utility for its 300 mw unit at Ratnagiri, citing a rise in the cost of imported coal from Indonesia. The state electricity regulator, however, rejected its plea in NOVEMEBR 2011.
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