India’s power regulator is expected to take a call soon on the demand for increase in contracted tariffs for plants with a combined capacity of 15,000 mw, a development that is likely to set the agenda for the other ailing companies in the sector.
The Central Electricity Regulatory Commission (CERC) is expected to pass an order on the appeals of Tata Power and Adani group soon, and start hearing next week petitions by Reliance Power. While these producers are seeking tariffs higher than the contracted Rs 1.20-2.96 per unit, Essar and Shapoorji Pallonjigroups have threatened to terminate their power supply pacts with Gujarat. State utilities, on the other hand, are demanding enforcement of contracts for cheap supplies over the next 25 years.
Producers have cited increased costs due to more expensive imported coal to justify their demand, but industry analysts say the matter is unlikely to be resolved soon. “Tata Power and Adani Power have been struggling to get higher tariff for the past 18 months. But no outcome is expected in the foreseeable future since the matter will move to appellate and Supreme Court,” said Sambitosh Mohapatra, partner at consulting firm PwC, adding that the direction for the power sector will become clear only after two-three years when at least one case is finally settled. The growth of the sector has been held up because investors rushed to grab assets with aggressive bids while hardly any state utility is coming forward for a tie-up with any producer for long-term power supplies, Mohapatra said.