Tata Power awaits APTEL & SC order to implement CERC tariff

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26 Aug, 2025 12:21

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In an in interview to CNBC-TV18, Anil Sardana, MD, Tata Power said the company was eagerly awaiting the Appellate Tribunal For Electricity (APTEL) and Supreme Court orders to implement CERC tariff.Tata Power had approached the Central Electricity Regulatory Commission (CERC) to consider an increase in its power tariffs after customers didn’t want to pay higher charges.CERC in February had ruled that the company will be allowed to temporarily increase tariffs to compensate for the additional fuel costs that it was incurring because of expensive coal imports. However, Appellate Tribunal (APTEL) in April had issued notice to Central Electricity Regulatory Commission (CERC), Tata Power and Adani Power on NGO, Energy Watchdog's plea. Energy Watchdog had moved Appellate against the CERC order which allowed Rs 1,200 crore compensatory tariff to two Mundra Projects of Tata Power and Adani Power in February this year.Later, the Supreme Court in August 2014 had stayed an order by the APTEL allowing Tata Power Co. Ltd and Adani Power Ltd to charge higher prices for electricity produced from their plants in Mundra, Gujarat.Below is the transcript of Anil Sardana’s interview with Reema Tendulkar and Pragya Bharadwaj on CNBC-TV18.Reema: We very often discuss the Mundra UMPP and the losses there. In this quarter you haven’t accounted for any compensatory tariff but can you give us few numbers of what can we expect from Mundra UMPP? For how many more quarters will there be a loss because some analysts highlight that even if you do take some price increases it is quite likely that Mundra UMPP is still going to be loss making for at least next few years. Give us a timeline of how you see the financials? A: You are right in saying that even if the compensatory tariff was to be implemented which in the present context will be about 40 paisa there could still be some bit of challenges on account of the foreign exchange variation that has happened which we have not sought compensation for, and because of that reason the mark-to-market capital cost keeps changing. Therefore depending on what is exchange rate we will have a little bit of under-recovery on account of the mark-to-market cost. However, as a part of the CERC verdict, if you recall there was a provision that beyond 80 percent one could sell in the open market and share the advantage of the margin; 60 with the procurers and 40 would be retained by the company and that would have more than made up for that change. So, we were looking forward to implementation of the CERC tariff and one has to now wait for the proceedings that are happening in APTEL and Supreme Court.Pragya: There has been a stay at the APTEL hearing now from the Supreme Court. What is your outlook on where the case is, could you give us an update of what is the expectation, what are the arguments that you are pitching in right now because that came in as a bit of a setback for you. I think the APTEL has rejected the force majeure clause very recently; that was the latest update. Could you give us an update on the case? A: The stay is exactly on the subject that you last touched that once the Supreme Court returned back the matter to APTEL saying that listen to them once again but don’t get influenced by the CERC order.It is in that context that we went back to APTEL and said since CERC order is not to be kept as the center of discussion then our arguments that were rejected by CERC in terms of change of law and force majeure should therefore also be relevant and which is what APTEL refused to take up those cases saying that it is time-barred. When we went to Supreme Court they have now therefore given the stay on that matter and said that they would like to hear because there is perhaps reason for them to believe that that it is an important argument from our side. Once that happens then both in terms of change of law which actually happened and force majeure which was served on us by the coal companies of Indonesia would therefore become relevant for the proceedings at the APTEL.

Pragya: In that case does this entire recent event mean that the entire case is now been pushed back and you are back to square one where the CERC had initiated hearings on this matter, had come out with the case, does that order now hold any ground or we are back to where we were and now Supreme Court will initiate fresh hearings on this from both parties you and your peer as well and from the discom’s perspective as well? A: There are two different branches to this case as are progressing now. Supreme Court is going to hear regarding our plea of 'change of law' and force majeure. APTEL will continue to hear on the possibility of change in tariff. So, the two are going to run parallel. Our hope is that if we are able to convince Supreme Court that 'change of law' and 'force majeure' are relevant then they will tell APTEL that take cognizance of these two also while announcing your judgment. So, that is the silver lining to this entire matter.

Pragya: Another sense that is emerging is that if there is no early resolution on this particular issue that companies like you may even look to move out of this project all together and there are companies within the space that have made clear their inorganic acquisition plans just very plant specific. Would that even be an option that Tata Power at some point of time could consider? A: It is a known fact that we are today suffering close to about Rs 1400 crore loss with the coal prices being suppressed. Under any circumstances we cannot continue to bear these losses. There is an erosion of networth, there is erosion of the entire equity base of the project and if that continues for a little longer time these projects will come to a closure. What a pitty it will be because even with regulated compensatory tariff included, the tariff still comes to Rs 2.75-2.80. Imagine if with imported coal you are able to deliver par at Rs 2.80, can there be more competitive source?Pragya: This time the coal realisations and that business of the company took quite a bit of a hit. What is your outlook on the Indonesian coal prices and if that continues then what is the extent of losses that this business will have to suffer and under-recoveries that this business will make given the kind of last year and the year before the kind of up surge that we saw in coal prices and compared to that what are the kind of under-recoveries that are possible, could you throw some color on that as well? A: The important point for you to understand and appreciate based on the research you must have done is the fact that we are perhaps the lone Indonesian outfit which continue to be in profit and that is what is basis the cost reduction that we did and that element is paying off today. The commodity prices are very low, today as you know that coal prices have come down to about USD 63 free-on-board (FOB), if that be the price naturally the margins will be suppressed. However, the good part is that compared to all our other competitors in the commodity markets we have done fairly well. The commodity market is a fluctuating one, is a volatile one and the fact is it will keep fluctuating. This market also yielded us great profitability in the year 2011-2012 and now that the coal prices are suppressed naturally there will be pressure. However, the good part is we still continue to make reasonably good profits. Reema: The sale of Arutmin mine was pending some approvals, what is the progress on that? How soon you will be able to sell that and secondly, since we are on that subject you also have an option to sell 5 percent stake in the KPC coal mine. Will you be exercising that right anytime soon; if you can talk about both of them? A: In fact both are virtually linked because the infrastructure companies which were linked to these two mines were operating as one company and that requires the company to be split between Arutmin and KPC and it is only then that the CPs can be met and we can move ahead with the transaction. Since the entire infrastructure which is linked to these two companies is a massive one and therefore it is taking a lot of time while lenders permission, etc. we are hopeful that within this financial year we should be able to achieve closure.