Ksenia Kondratieva The stocks of Tata Power and Adani Power shot up around 20 per cent on Monday following a Supreme Court directive to the Central Electricity Regulatory Commission (CERC).

The SC asked the CERC to consider amending the power purchase agreements (PPAs) signed with Tata Power, Adani Power and Essar Power for their imported coal-based thermal plants in Gujarat.

It gave the CERC eight weeks to consider and approve the tariff hike for the three plants proposed by the High Power Committee (HPC) appointed by the Gujarat government earlier this year to find ways to salvage the loss-making projects, according to agency reports.

The apex court was hearing the Gujarat government’s petition seeking intervention to implement the suggestions of the HPC, chaired by former SC judge Justice RK Agrawal.

According to industry sources, the HPC has suggested a tariff hike of at least 50 paise per unit along with a complete fuel cost pass-through, and an extension of PPAs by 10 years.

In another proposal, the HPC said lenders with exposure of over ₹20,000 crore in the three projects may be allowed to write off part of their loans.

The two-judge Bench said the decision on amending the PPAs should not be bound by last year’s order of the apex court that rejected a tariff hike. In April 2017, the SC had ruled out raising the tariff, as well as any compensation sought by power producers citing changes in fuel costs.

The net worth of Tata Power’s 4,000 MW and Adani’s 4,620 MW plants in Mundra, and Essar Power’s 1,200 MW plant in Salaya, has been wiped off over the years.

The projects have been making losses ever since a change in Indonesian law in 2010 led to an increase in the price of coal that the power producers import to run their plants. Tata Power, Adani Power and Essar Power did not comment on today’s development.

Benefits for all

As Businessline reported recently, consumer groups Energy Watchdog and Prayas opposed the tariff hike, suggesting that producers could get a combined relief of ₹1.29 lakh crore over the next 30 years at the cost of consumers if the recommendations of the committee are implemented.

Two industry analysts who did not wish to be named said that while the favourable ruling of CERC would bring relief to the power producers, it would also benefit power procurers, and would not necessarily result in increased burden for consumers.

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