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Home News Power Sector News Mumbai: Tatas, Reliance tries to takeover each other to become monopoly

Mumbai: Tatas, Reliance tries to takeover each other to become monopoly

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Power TussleIn Mumbai, Battle has broken out between energy companies belonging to two of India’s largest business houses, the Tatas and the Anil Dhirubhai Ambani Group (ADAG). Over the past few days, Tata Power (TPC) and Reliance Infrastructure, or RInfra, have been locked in an escalating and bitter war of words over the terms of supply of power to Mumbai’s suburbs. Both companies have approached the state government and the regulator, Maharashtra Electricity Regulatory Commission (MERC), with proposals to take over the power generation and distribution assets of the other.

TPC has told the government that it should be allowed to take over parts of RInfra’s distribution network and supply power to around three lakh of RInfra’s consumers. On its part, RInfra wants permission to acquire TPC’s generation assets located in Trombay and Khopoli. Both propose to carry out these acquisitions at the so-called book value, or the value mentioned in the company’s balance sheet, which is a tiny fraction of the market value of these companies.

RInfra, a power supplier to 28 lakh suburban Mumbai consumers, lashed out at rival TPC’s proposal to take over some of its distribution network.

RInfra said the TPC proposal is “legally untenable”, as around 30,000 of its consumers have switched over to TPC under a scheme mandated by the electricity regulator. The Electricity Act of 2003 allows consumers to choose their power supplier.

“RInfra has extended co-operation in the migration of consumers and, therefore, 30,000 consumers have already opted for TPC supply on RInfra network. Therefore, TPC’s suggestion to transfer RInfra’s distribution network to it has no merit. TPC’s suggestion of transfer of network is also not legally tenable,” said RInfra’s CEO and whole-time director Lalit Jalan.

The face-off stems from the prolonged confrontation between TPC and RInfra over distribution of power in Mumbai. RInfra, TPC and BEST, owned by the state government, have supplied power to Mumbai’s consumers. For the most part, TPC has been a generator — supplying power to BSES, which was taken over by RInfra early this century, and BEST.

TPC has also been trying for a retail licence since early 2003 after the passage of the Electricity Act, but its legal right to operate as a retail distributor was upheld by the Supreme Court in 2009, after a prolonged and convoluted litigation.

The apex court agreed with TPC’s contention that it was not legally bound to supply power to RInfra, since the latter has not signed a power purchase agreement (PPA) with it. TPC supplies 500 MW to RInfra, but the two have not been able to sign a binding contract.

In the meantime, MERC allowed RInfra and BEST consumers to shift to TPC, if they so desired. The switchover and fight over TPC’s 500 MW have triggered a larger corporate confrontation. TPC wants to sell the 500 MW to other buyers. This has forced the government to step in, because if RInfra is forced to purchase 500 MW from the open market, tariffs will shoot up for industries and households.

TPC officials said that the company had approached the state government to transfer some parts of RInfra’s distribution network to it. This, it said, would facilitate the transfer of around 2.8-lakh consumers from RInfra to TPC. TPC, which caters to around 60,000 consumers, including the 30,000-odd added under the switchover plan, said such a transfer would ensure reduced tariffs for the consumers and also lessen RInfra’s burden.

This provoked a furious response from the ADAG company. Mr Jalan said RInfra had suggested to the government that it facilitate a book transfer of TPC’s generation assets to RInfra.

“We have told the government that RInfra is committed to provide services to the consumers of Mumbai as per the regulatory norms and, therefore, it would be prudent that TPC transfers the generating assets, built for Mumbai and part paid by consumers, to RInfra at book-value, so that the benefit continues to remain with the consumers. RInfra has also give an undertaking to the government that this power would be fully utilised for Mumbai consumers and will not be sold outside,” Mr Jalan said.

Reacting sharply to the TPC claim that RInfra had consistently avoided signing a PPA with it, Mr Jalan alleged that TPC had no intention of signing a PPA.

“The statements made by TPC are factually incorrect. We have submitted all the facts with documentary evidence to the committee of secretaries formed by the state government (which is looking into the dispute). It clearly explains that TPC had no intent to sign PPA with RInfra in a rationale manner in spite of repeated requests by RInfra,” the RInfra CEO said.

Stepping up its attack, RInfra has charged TPC with selling power generated for Mumbai outside the city for profit to its shareholders. “This can independently be confirmed from state load dispatch centre,” Mr Jalan said.

RInfra has also taken note of TPC’s claim that it was not legally bound to supply power to RInfra and that SC had also upheld its right to choose its consumers. Acknowledging the SC ruling limiting powers of MERC, RInfra has pointed out that the state government had the right under Section 11 of the Electricity Act, 2003, to issue directives to a generator in the larger public interest.

“TPC’s withdrawal of capacity from the consumers for selling it as a merchant for profiteering is surely a matter of public interest and deserves to be dealt with by all the stakeholders, RInfra being one of them,” the company CEO said.

Source- Economic Times

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