The Delhi high court on 22-03-2016 reserved its verdict on a plea brought by power companies—Monnet Power Co. Ltd, Mandakini Exploration and Mining Ltd (MEML)and Jaiprakash Power Ventures Ltd— seeking clarification over capping of the fixed charge component of the rate of electricity generated from plants that won coal block auctions earlier.
A bench comprising justices Badar Ahmed Durrez and Sanjeev Sachdeva reserved orders for the three power companies and asked them to submit a short note on the main points of arguments within one week.
The court also allowed Jaiprakash Power to take part in the bidding process for procurement of electricity while subjecting it to the final outcome of the case.
"The fixed cost consists of several components - return on equity, interest on loan, interest on working capital, depreciation and operation and maintenance expense. These elements will all be different in each cases so capping them would be discriminatory and unconstitutional," Kapil Sibal, lawyer for MEML, told the court.
The power companies had opposed the idea of capping the fixed component of electricity tariff and told the court that such a move would be contrary to the regime of open bidding process adopted to determine electricity tariff.
MEML had earlier contended that the proposed cap would amount to change in bidding conditions of coal mines for power sector and could potentially destroy the company. The cap is to prevent thermal power plants from increasing tariff on the electricity they generate.
The power ministry in April had amended guidelines for power procurement by states, under which state power distribution companies in consultation with their regulatory commissions could determine a ceiling for fixed costs for every unit of power.
Under this system, the fixed cost would be indicated in advance to all bidders before distribution companies invite bids for power supply.