Panel to decide tariff hike for Mundra plant: Adani Power

Adani Power is awaiting directive on tariff hike after the sector regulator allowed it to raise price but the quantum is yet to be decided by the appointed committee headed by HDFC chairman Deepak Parekh

In an interview to CNBC-TV18, Ameet Desai, CEO, Adani Advisory said that the firm is expecting an early resolution on how much increase it can undertake to wipe out losses arising due to expensive imported coal. Read This: Adani Power commissions third 660 MW unit of Maha plant
Desai further said that the representatives of power and distribution companies will unanimously decided the quantum of tariff increase from power plants being fed with expensive imported coal.
Adani Power had approached electricity regulator Central Electricity Regulatory Commission (CERC) for allowing it to increase tariff for their imported coal based projects.
Adani Power had sought revision in tariff from its 1,980-MW Mundra project in Gujarat to which the CERC allowed it to revise power price per unit till the time it recovers losses.
CERC also directed constitution of a Committee consisting of the Principal Secretaries of the states concerned and top officials of distribution companies, chairman of the petitioner company or his nominee, an independent financial analyst and an eminent banker to recommend the compensatory tariff. Below is the verbatim transcript of Ameet Desai's interview on CNBC-TV18

Q: Do you think you will be able to pass down the increase in cost? Will the State Electricity Boards (SEBs) agree to the cabinet committee on economic affairs (CCEA) proposal and pass it down through fairly sharp tariff hikes? Do you think implementation will be tricky despite the CCEA nod?
A: The country has two major issues; on one hand we have almost 78,000 megawatts of capacity coming up on stream by March 31, 2015 and despite the best efforts by Coal India, the production is not meeting the requirements. Last year, the Prime Minister took an initiative that would not render the capacities and will not let the growth suffer.
The first step that was suggested by the inter-ministerial committee was pooling of prices, which was not accepted by the states. On the other hand, Coal India was unable to sign the annual contracted quantity at 100 percent. So now, with this directive it allows Coal India to sign up to 65 percent of annual committed quantity for all the projects that are coming on stream by March 31, 2015 and those who have the power purchase agreements (PPAs).

The beneficiary of at least availability of supply would be the state utilities. Since it is directive from the government, price hike would depend from case to case and at different points of time, but according to government, it will be between 20-25 paise per unit which is not much. The country would be able to debottleneck to a great extent the installed power capacity which is otherwise unlikely to be used.
This will also ensure that the investment is productively utilised rather than lying idle and would benefit everyone, utilities that are starving without power, people and industry suffering without power, power companies that have put up capacities. In infrastructure projects you have the leverage therefore, there is bank finance involved and the cause was not coming through. On a balanced note, this works out to be a win-win situation albeit at a marginal increase in the cost.

Q: With regards to your own company, what kind of impact will 20-50 paise per unit increase have?
A: It would be hard for us to quantify the exact impact for the reason that this would work on dynamic basis. On every situation where Coal India supplies coal, people would use that and whenever there is a shortfall there would be blending of imported coal that would be used.
We had the tapering coal linkage consequent to the de-allocation of the captive coal mines for Tiroda power projects which now gives the clarity about the fuel supply from Coal India. For 7,200 megawatt which is operative and the balance 2,000 which is getting on stream this year for about 9,200 megawatt, at this juncture, there would be adequate fuel supply for us as a combination of domestic coal linkage and some import and that would help us generate the power to the most. Q: The problem is only with the imported bit of coal because that would come at a higher cost presumably. Your experience with the last CERC ruling was that power and tariff increases are not easily pass-through by the SEB, for example a committee has been formed, which you are part of, to look at the compensatory tariff. Has any progress happened on that or are you pretty much stuck there?
A: The committee had a very constructive progress over the last one-and-a-half month. It is chaired by Deepak Parekh and the utilities are also putting in their best resources to work at the committee. In a very short period from now, the final report should be with CERC from the committee and bases that it will pave the way for at least this particular case.
Imported coal comes at a slightly higher price. Over the last one year, imported coal price has come off from the peak of USD 105-110 down to about USD 85-87 for the 6,300 kilo caloric gross calorific value (GCV) coal and for other coal it has further come down.
Coal prices, just like other commodity prices globally have softened and therefore, import in this context would not be as burdensome as it would have been if the case was to be viewed last year or a year before last.