Top CEOs to meet PM on power sector issues next week

Excerpts from After the Bell on CNBC-TV18 Watch the full show »

A high power delegation of power company CEOs will meet the Prime Minister next week on critical issues with respect to the sector, reports CNBC-TV18's Siddharth Zarabi.

This is going to be an important meeting because things are coming to a head on this entire matter. Two key points that are troubling power producers, including the yet to be set up ultra mega power projects (UMPPs) which impacts all companies including the Tata's as well as Anil Ambani's Reliance Power will be discussed.

Essentially discussions have begun with the government and the Prime minister himself is going to meet top power sector chief executives next Wednesday. The line-up is very impressive - Ratan Tata, Cyrus Mistry, Anil Aggarwal, Anil Ambani, Navin Jindal, Gautam Adani will meet the Prime Minister.

Two key issues that are likely to be discussed really has to do with the problems that they are facing on project execution, the dichotomy and differences in government policy as well as international developments on which no one has a control. This includes the recent bar that Indonesia put on coal exports which effects several of our UMPPs because they had completely premised the power purchase agreements based on a Indonesian coal prices spread over a period of time with a huge escalation due to that export bar. So there is a situation which is arising now where the PPA themselves have been in some ways rendered in fructuous.

Therefore, a reference is now going to go to the Attorney General of India in which the key issue that will be sought in terms of legal advice from the AG will be if India can change the power purchase agreement after it is signed. It has never happened, it is an unprecedented situation, but the gravity of the matter has meant that the empowered group of ministers (EGoM) has recently decided to refer the matter to the Attorney General. The Attorney General actually should have dealt with this matter by now because the EGoM had met in the first week of December, but whatever are the delays, now we will see this top level meeting as well as reference going to the AG to try and find out a wire media.

So companies which are depended on certain pricing calculations which were incorporated in the PPA assuming certain price of imported coal, now that the basic situation has been changed, can it be altered, and can these companies look at other sources. Also parallelly, the differences between the power ministry and coal ministry on the usage of excess coal, for instance from the Sasan coal block for Reliance Power UMPP, that is going to be discussed. We have seen the coal ministry going ahead and unilaterally on its own announcing a policy on its website, which was incidentally taken off after half an hour, where it said you cannot go ahead and produce excess coal and sell it. That matter has also been referred to the Prime Minister. So clearly next week might see the government's response to its initiative.

Let me just end by saying that there seems to be something going on really. Anil Ambani some weeks back took a delegation of telecom CEOs to meet almost everyone in government in Delhi to figure out telecom issues and now similar sort of thing happening in power. So one does not know what to make of it.