The Karnataka government is mulling legal action against the Lanco Infratech-owned Udupi Power Corporation (UPCL) if it does not resume power generation at its 1,200 MW thermal plant in coastal Karnataka. The private developer has stopped generation since June 14 citing lack of money to buy coal. Its two 600 MW units are fired on Indonesian coal, and they generate 25-26 million units a day at 85% plant load factor. "We have cleared their bills from time to time, and had even released an advance of Rs 200 crore. I don't know where they spent that money.
Now they have stopped generation all of a sudden," Karnataka's energy minister DK Shivakumar said. If the firm continued with the shutdown, then the government will issue a notice and take action as per the law, he added.Lanco Infratech, the listed infrastructure developer which owns UPCL, is headed by L Lagadapati Madhusudhan Rao, the Andhra Pradesh-born businessman, and brother of former Congress MP L Rajagopal.
Independent analysts say it's Lanco which will end up suffering the most due to non-generation of power as it will lose out on fixed costs as well. This will affect its debt servicing and operational expenses.
This month, Karnataka has had an energy demand between 141 and 163 million units, and Lanco's Udupi units can meet a sixth of the state's demand at the current levels of consumption. "It would have caused us big inconvenience but, fortunately, about 1000 MW of wind power is available to us due to the onset of wind season. This has mitigated the crisis," Shivakumar said.
The Udupi Power Corporation and the five government-owned electricity supply companies (Escoms) in Karnataka have been fighting each other at the regulatory forums for three years now making claims and counter-claims. Each side has accused the other of reneging on the obligation.
Lanco commissioned its first 600 MW plant near Mangalore in November 2010 and the second plant of the same capacity in August 2012. The Escoms were paying a tariff of Rs 3.127 per unit for Unit I with fixed costs at Rs 1.15 per unit until August 2012.
Early this month, the Appellate Tribunal of Electricity directed the Escoms to pay the developer a fixed cost of Rs 1.71 per unit, effective from February 1, 2013, as per the orders of the Central Electricity Regulatory Commission (CERC). Lanco has taken the stand that the revised tariff for Unit I is applicable from the date of commissioning of the plant. The Escoms have rejected that. "They are making inflated claims.
We will, of course, release some money now. The issue is however, before the courts (regulator)," the energy minister said. The Lanco InfratechBSE -4.81 % Limited, however, declined an official comment. Its officials claimed Escoms owed them Rs 1,800 crore in dues as per this month's CERC order. According to a senior Lanco executive, the order is again under litigation leading to non-payment of current and past arrears.