The Central Power Sector Regulator (CERC) has directed five state governments to compensate Tata Power for the losses it incurred from importing coal for its 4000 MW Mundra Ultra Mega Power Project (UMPP).
A week ago, CERC directed Gujarat and Haryana to compensate Adani Power for its coal imports for 2424 MW of capacity at Mundra, due to unanticipated and un-absorbable spiralling prices of Indonesian coal.
Mr. Amit Kapur led the team of J. Sagar Associates (JSA) that successfully strategized and anchored both the cases and partly argued the matters. They were led by Mr. CS Vaidyanathan, Senior Advocate who argued in the Adani case and Mr. Aspi Chinoy, Senior Advocate who argued the Tata case.
On this win – Mr. Kapur said “The majority judgement in the Mundra Ultra Mega Power (Tata Power) case is a step in the right direction by CERC as the regulator in exercise of its statutory mandate in the peculiar facts of the case and keeping in view the interest of both project developer and consumers.
CERC has directed the committee to submit its report by 15th May 2013 for the parties to find out an acceptable compensatory tariff over and above the tariff decided under the PPA to mitigate the hardship arising out of the need to import coal at benchmark price on account of Indonesian Regulations with an independent financial analyst of repute and an eminent banker dealing and conversant with infrastructure sector. The Committee has been permitted to suggest any further measures which would be practicable and commercially sensible to address the situation.
The Committee shall also keep in mind the following considerations:
(a) Net profit less Govt. taxes and cess etc. earned by the petitioner's company from the coal mines in Indonesia due to Indonesian Regulation corresponding to the quantity of the coal supplied to the Mundra UMPP being passed to the consumers.
(b) The possibility of sharing the revenue due to sale of power beyond the target availability of Mundra UMPP to the third parties may be explored.
(c) The possibility of using coal with a low gross calorific value for generation of electricity for supply to the respondents without affecting the operational efficiency of the generating stations.
This decision shows the way forward to the big issue of stranded asset in diverse infrastructure sectors in India – with around Rs. 750,000 crores of bank financing stuck and Rs.10,50,000 crores of sunk cost. There is around 30,000 megawatt of power capacity stranded due to coal and gas supply issues costing between Rs. 125,000 to Rs. 150,000 crores.”