NTPC challenges CERC order on tariff norms in Delhi High Court

NEW DELHI: India's largest power producer NTPC has challenged the electricity regulator's order on tariff norms in the Delhi High Court. The regulations issued by Central Electricity Regulatory Commission ( CERC) raised concerns about the company's earnings and triggered a steep fall in NTPC's shares, prompting the state-run firm to file a writ petition.

Analysts and experts said the regulator's revised tariff norms for 2014-2019 could weaken NTPC's margins. "NTPC's earnings before interest, taxes, depreciation, and amortisation (EBITDA) and net income will be weaker largely because the company won't be able to enhance its return on equity as much, given that it will now have to use the 24-26% effective tax rate from the 33% corporate tax rate that it has been using so far," said Standard & Poor's Ratings Services. Also, with the new regulations, NTPC's not be able to claim incentives based on plant availability factor. Its incentives will be based on actual power generation of its plants, which is financially less attractive for the company.

NTPC officials did not give details about the company's petition. State-run power producers are unhappy with new tariff regulations. The regulator recently agreed to compensate Rs 329 crore to Tata Power and Rs 829 crore to Adani Power as their fuel costs had gone up.

CERC also set a formula to compensate future losses of private firms that originally agreed to supply electricity at cheaper rate through competitive bids but sought tariff hikes saying that the new Indonesian coal price regime is making their power projects unviable.