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The Central Electricity Regulatory Commission has allowed Adani Power's 2000 MW Mundra power project to pass through higher imported coal costs to the customers.
In an order issued on Friday, the CERC said that even after pass through the electricity cost will be cheaper than the alternatives like spot purchase that are available. "It has not been disputed by any stakeholder, including consumer groups, that even with full pass through of the fuel prices, these projects (Adani Mundra project) will continue to be competitive and cheaper than alternate sources.”
Adani Power had approached the regulators for allowing a higher tariff when the cost of imported Indonesian coal shot up. After getting a directive from the Supreme Court, the Gujarat State Electricity Board had approached the CERC on behalf of Adani Power to seek approval to amend the terms of the power purchase agreement (PPA).
“The Commission in exercise its powers under Section 79 (1) (b) of the Act read with Article 18.1 of the PPAs approves the Supplemental PPAs to Bid-01 PPA and Bid-02 PPA,” the CERC order said.
These Supplemental PPAs have been mutually agreed upon by the Gujarat State Electricity Board and Adani Power. Under the Supplemental PPAs, the imported coal cost shall be pass-through to consumers on an actual basis subject to a ceiling of $ 110 per tonne.
Interestingly, the price of Indonesian coal has been on a decline and according to Indonesian media, the government had set the coal reference price at $ 88.85 per tonne for April 2019. Comparably, coal was priced at $107.83 per tonne in August 2018. These prices are for coal with a gross calorific value of 6322 Kcal/Kg.
According to the Supplemental PPAs approved by the CERC, the landed cost of coal shall be worked out considering a 10 per cent variation to the price set by the Indonesian government. This tolerance of 10 per cent shall not be applicable for coal procured from mines owned by the seller or its affiliates.
In a bid to prevent over invoicing, the CERC said, “The seller shall purchase coal through competitive bidding process for which bid document and rate discovered is to be approved by GUVNL. The seller shall continue to supply power and bear the price risk beyond the ceiling price of $ 110 per tonne.”
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