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The Adani Group Chairman, Mr Gautam Adani, today said that the price benchmarks set by Indonesia for export of coal may create hurdles for the power sector, including group outfit Adani Power Ltd (APL), in the “immediate future”.
The group, however, is bullish about the long-term prospects of power sector.
Adani Group, incidentally, is India's largest coal importer and is setting up nearly 10,000-MW capacity in Gujarat, Maharashtra and Rajasthan.
The group also has mining assets in Indonesia and Australia.
According to Mr Adani, while the slow growth in Indian coal production made it imperative for the power sector to depend on imports — mostly from Indonesia — the power sector is currently hit by the dual impact of a “sudden” rise cost of imported fuel and lower demand for electricity than projected.
Talking to Business Line over telephone, Mr Adani said that the “sudden change in law” by the Indonesian Government was not envisaged during the signing of power purchase agreements (PPAs).
“This is an issue regulator and distributors in India should consider,” he said.
The message was clear: The existing power purchase agreements have proved unviable and needs to be renegotiated.
Incidentally, Adani Power Ltd — which has entered into at least six PPAs for supply of nearly 7200 mw to State utilities of Gujarat (two), Haryana (one), Maharashtra (two) and Rajasthan (one) — has made a move towards renegotiation of tariffs.
APL seeks renegotiation
To start with, the company wanted to discontinue supplies of 1,000 MW of power at Rs 2.35 a unit to Gujarat State utility from its Mundra facility.
While a State regulator ordered the company to honour the PPA, Adani Power has reportedly approached the higher authorities for renegotiation of tariff.
However, this is just the tip of the iceberg. The Mundra facility is scheduled to supply another 1000 MW to Gujarat at Rs 2.89 a unit from February 2012 and 1,400 MW at Rs 2.94 to Haryana from August 2012.
The upcoming generation facility at Tiroda (Maharashtra) is scheduled to supply 2640 MW to State utility of Maharashtra through two PPAs of 1,320 MW each at Rs 2.64 and Rs 3.28 respectively from August 2012. Pacts are also in place with Rajasthan for supply of 1,320 MW from Kawai (Rajasthan) facility at Rs 3.20 beginning August 2013.
If Mr Adani's observations are of any indication, APL is likely to seek renegotiation of tariff for a bulk of these PPAs.
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