Tata Power won a major relief on Monday after the electricity regulator allowed it to increase tariff for power generated from its 4,000 MW Mundra plant. Allowing the hike, the Central Electricity Regulatory Commission ordered that a committee be set up to work out the price increase and decide the compensatory package. The committee is to submit its report by May 15.

To affect Discoms

The Commission’s decision to permit a tariff increase will affect consumers of seven electricity distribution utilities in Gujarat, Maharashtra, Rajasthan, Punjab and Haryana. The revised tariff will be higher than existing levelised tariff of Rs 2.26/unit. The current tariff for new power projects is in the Rs 3.50-7.00/unit range.

This is the second such decision by the CERC allowing projects fired on imported coal to increase tariffs, as fuel prices have risen. On April 2, the regulator allowed a similar hike for Adani Power’s 4,620 MW Mundra plant.

Adani judgment

As in the Adani judgment, one member of the commission dissented the increase.

Coastal Gujarat Power Ltd, the special purpose vehicle that runs Tata’s Mundra plant, petitioned the CERC that because of the rise in the Indonesian coal price, the project had become economically unviable at electricity rates decided in 2007.

Tata Power said that this decision was an important step in resolving the impasse affecting imported coal based power projects that were taking a hit due to extraneous factors.

According to industry watchers, the tariff relief clears the way for Tata Power to go ahead with the second phase of the project.

“It all depends on how Mundra shapes up. That would be a major consideration for Tata Power.

“For us to make sure that Mundra becomes viable and does not eat into our cash flows is a very important factor,” Anil Sardana, Managing Director, Tata Power, had earlier told Business Line.

Amit Kapur, Partner at J. Sagar Associates, a legal firm that represented Tata Power in the case, said: “Though at this stage it is premature, if not satisfied with the CERC directive, the Discoms may approach CERC (review) or the Appellate Tribunal for Electricity on the matter.”

“Now that CERC, a quasi-judicial body, has given a clear finding and laid down principles for arriving at the compensatory tariff, it is expected that the parties will be guided to resolve matters through mutual consultation with the intervention of two independent reputed experts,” Kapur explained.

The order was passed by three members of CERC — Pramod Deo, M. Deena Dayalan and V.S. Verma. Chairperson of Central Electricity Authority A S Bakshi is a member in the panel that heard the case.

Dissenting member

CERC member S. Jayaraman disagreed with the other members. According to him, there is no scope either under the power purchase agreement or under the Act to establish a mechanism to grant relief to the petitioner as prayed for. “The petition lacks merit and is liable to be dismissed,” Jayaraman said.