HomeEnergy NewsGujarat Cabinet revokes its decision on compensatory tariff in public interest

Gujarat Cabinet revokes its decision on compensatory tariff in public interest

The Gujarat Cabinet on Wednesday revoked its decision on compensatory tariff in public interest, fearing a financial burden on electricity consumers.

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By Anshu Sharma  July 10, 2020, 11:13:36 AM IST (Updated)

Gujarat Cabinet revokes its decision on compensatory tariff in public interest
The Gujarat Cabinet on Wednesday revoked its decision on compensatory tariff in public interest, fearing a financial burden on electricity consumers.


The decision to allow charging tariffs prospectively on account of increased imported coal prices for the power companies Adani Power, Tata Power, and Essar Power was taken in 2018, followed by the first revised Power Purchase Agreement (PPA) signed by Adani Power and Gujarat's power distribution company (discom) Gujarat Urja Vitran Nigam Limited (GUVNL).

In 2019, the Adani power's revised PPA was approved for compensatory tariff by the Central Electricity Regulatory Authority (CERC). Gujarat discom GUVNL this year, in February, filed a petition to recall CERC's approval, which allowed implementation of the revised PPA terms agreed by both GUVNL and Adani Power.

The revised PPA was agreed upon for 1,200 MW capacity out of about 4,600 MW Adani power's Mundra, Gujarat based plant.

The decision to revoke the Cabinet's approval comes on the back of a downward trend in coal prices. The compensatory tariff was allowed for the three power companies prospectively on account of increased prices of coal, which were imported in the past.

"In view of the market trend of Indonesian coal price, changed scenario, and to safeguard the interest of the consumers, Govt. of Gujarat has revoked the GR dated 1.12.2018 as the same was not fulfilling its objective and purpose. The suitable decision in the matter of Tariff for Imported Coal based Project would be taken in the future by Govt. of Gujarat considering the consumers' interest" said the Department of Energy and Petrochemicals of Gujarat.

A high-level committee had recommended compensation on the ground that coal cost should not exceed $120 a tonne. The reduced prices of coal recently have further reduced the index to not exceed $90 per tonnes, as per recent negotiations of PPAs. The tariff calculation will now be done on the basis of the new parameters on case to case basis.

Sources in the Gujarat government have indicated that negotiations of terms and conditions for revised PPAs are almost finalised in the compensatory tariff matter for Tata Power and Essar Power.

Adani Power has about 4,600 MW capacity in Gujarat's Mundra, out of which it supplies 1,200 MW to Gujarat and about 1,400 MW to Haryana. Tata Power has a capacity of about 4,000 MW and it supplies to 5 states, which include Gujarat, Maharashtra, Rajasthan, Haryana, and Punjab. Essar Power supplies about 1,200 MW to the state of Gujarat from its Salaya power plant.
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