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Home News Power Sector News Gujarat writes to Centre to make Adani Power's Mundra plant viable

Gujarat writes to Centre to make Adani Power's Mundra plant viable

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Adani PowerThe Gujarat government has written to the Centre saying the state faces an electricity crisis as Adani Power has told the state that running its imported coal-based power project at Mundra is increasingly becoming unviable.

Last month, Supreme Court denied compensation to Adani Power's Mundra power plant for the rise in the price of coal that it imported from Indonesia. Two officials, including one from the finance ministry, confirmed that Gujarat chief minister Vijay Rupani has written a letter saying that if the issue is not resolved at the earliest, it may lead to an electricity crisis in the state.

"The letter has informed us that Adani Power has told the state government that it is increasing becoming difficult to operate the Mundra plant. We need to consider what kind of help we may offer. We may give them guidance, if they need," one of the officials said. Power, Coal, Renewable Energy and Mines Minister Piyush Goyal said it was matter for the state and the regulators to look at.

The finance ministry official said that if required, an inter-ministerial discussion with representation from officials in power and coal ministries will be held to resolve the issue. Adani Power in 2006 signed a pact with the Gujarat state power distribution utility for supply of 1,000 MW electricity at Rs. 2.35 per unit. The company, along with Tata Power, claimed compensation from the distribution utilities for costlier imported coal post a change in law in Indonesia.

On April 11, the Supreme Court ruled that increase in coal prices due to change in overseas laws cannot be considered as change in law under the PPA. According to Nomura, Adani Power may have to write off 80% of '4,400-crore compensatory tariff upto December 2016, which it recognised as part of revenues. "If they (Adani) are not able to sustain this, the lenders can look at invoking management change," said one of the official quoted above.

A senior bank executive, however, said that banks alone cannot save the project unless some policy action is taken. Adani Power and Tata Power had approached power regulator Central Electricity Regulatory Commission (CERC) for compensation after Indonesia banned coal supply at less than international prices in September 2010. CERC had ruled that such change cannot be classified as change in law or force majeure under the PPAs but allowed compensatory tariff under exercise of regulatory power.

The Appellate Tribunal for Electricity ruled that the case qualifies under force majeure clause and asked CERC to reconsider the quantum of compensation. Against this, the state distribution companies appealed in the Supreme Court. The apex court allowed CERC to calculate compensation till verdict. CERC had issued the mechanism to compensate the companies.

Source- ET


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