Gujarat govt cancels earlier resolution on power tariff for Tata, Adani, Essar

The Gujarat government has cancelled a resolution from 2018 that allowed Tata Power, Adani Power and Essar Power to increase tariffs after coal prices declined since then.

The three power generation companies operate projects that run on imported fuel and had sought the increase in tariffs to account for higher coal prices.

However, in an order in April related to Essar Power, the Gujarat Electricity Regulatory Commission (GERC) made some modifications as coal prices had softened, which the state government now wants to incorporate in power purchase agreements (PPAs).


“The government resolution from 2018 has been revoked as the coal market has changed. The Gujarat regulator has given directions that aim to allow prudent cost of coal as a pass-through so that if the private generators are facing any hardships, that is reduced but at the same time the customers’ interest is taken care of. The government would examine future PPAs on the back of these directions,” Shahmeena Husaid, managing director, Gujarat Urja Vikas Nigam, told ET.

Indonesia’s benchmark thermal coal reference price in June was set close at a four-year low of $52.98 a ton, which is 35% lower than in the previous year.

Late Thursday, the Gujarat government clarified in a statement, "The main objective of GR dated 1.12.2018 was to protect interest of consumers while ensuring supply of power from 4805 megawatts capacity at reasonable rates. Further, in view of market trend of Indonesian coal price, changed scenario and to safeguard the interest of the consumers, government of Gujarat has revoked the GR as the same was not fulfilling its objective and purpose."

The government statement said that the suitable decision in the matter of tariff for imported coal based project would be taken in future by considering the consumers interest.


GERC said in the order for tariff for Essar Power, dated April 27, that generators should buy coal through competitive bidding. It directed that fuel costs should be calculated by considering the lower of the actual cost, the coal reference price set by Indonesia and the indexes published by other specified agencies. The ceiling for the reference price should be reduced to $90 per ton from $110 earlier.

In an order dated June 12, the state energy ministry notified that while the earlier resolution is revoked, supplemental PPAs with Tata Power arm Coastal Gujarat Power (CGPL) and Essar Power will be signed to factor in the GERC’s directions.

In the case of Adani Power, GUVNL filed a recall petition seeking cancellation of relief allowed earlier, which was pending with the Central Electricity Regulatory Commission (CERC). Until the CERC gives an order, GUVNL will consider the energy charges for Adani Power on a provisional basis.

Tata Power, Adani Power and Essar Power declined to respond to ET’s query on the matter. Tata Power sells 1,800 megawatts to Gujarat from its 4,000-MW ultra-mega power project, Adani Power has two PPAs for 1,000 MW each, while Essar Power sells about 800 MW to the state.

The Gujarat government has also directed GUVNL to file a separate draft PPA for CGPL, incorporating GERC’s directions, for approval. This could clear the way for signing of a pact between the project and its largest procurer state, which has been long pending as other procurer states have not agreed on a consensus.