In a big blow to Adani Power, Gujarat Government’s Gujarat Urja Vikas Nigam (GUVNL) has approached the electricity regulator to withdraw support of higher tariffs to Adani Power’s imported coal-based Mundra power plant. The GUVNL alleged breach of terms of the relief package by the Gautam Adani-led power firm Adani Power.
The GUVNL has also sought a refund with interest of excess power tariff paid to Adani Power due to fuel cost pass-through. In its petition to the Central Electricity Regulatory Commission (CERC), GUVNL has demanded to recall the commission’s order passed on April 12, granting approval to Mundra Thermal Power Station passing on the burden of imported coal costs to the consumer.
CERC had approved the higher tariff by making provisions through new ‘supplementary agreements’ to the original power purchase agreements between Adani Power Mundra and GUVNL. Adani Power’s Mundra plant had signed two power purchase agreements (PPAs) of 2,000 Mega Watts (MW) with the Gujarat government in February 2007.
The Gujarat Govt’s firm GUVNL has asked CERC to declare that Adani Power has been in breach of the ‘supplemental agreements’ signed in December 2018 and also pronounce the two supplemental agreements ‘void’ and ‘not enforceable.’ The GUVNL has alleged breach of the add-on contracts by Adani Power, which, after signing them, moved the Supreme Court to end one of the agreements. A senior GUVNL official said they have paid 90% of the revised tariff to Adani Power under the add-on PPAs.
This is a classic case of Corporate Banking nexus to milk the Government which ultimately leads to the looting of taxpayers. Earlier in a bizarre incident State Bank of India suo motu approached the Supreme Court assuring that they are ready to bear the burden of some portion of power firms’ loss. This was an attempt to save the power companies like Tata Power, Adani Power, and Essar Power. Why the SBI went to Supreme Court to bear the burden of power companies when the Bank itself is bearing the burden of more than Rs. Two-lakh crores from Non-Performing Assets chaos?[1]
Who authorized SBI to take the burden of loss-making power companies? This exposes a deep-rooted nexus between politicians, bureaucrats, bankers with big corporate houses. After this dubious move of SBI in October 2018, the Adani Power’s stock has more than doubled when a high powered committee appointed by the Gujarat government recommended the relief to three imported coal-fired plants in Gujarat.
The petition to which the Government of Gujarat has also been made a respondent, mentioned that after the settlement with GUVNL was approved by CERC on April 12, Adani Power on May 20 filed an application before the Supreme Court to get one of the PPAs terminated. GUVNL has said that Adani Power has breached the supplemental agreements as it should not have claimed any retrospective relief for its units. As per the supplemental agreements, the relief was available only from October 15, 2018.
The Supreme Court on July 2 allowed Adani Power Mundra to terminate the PPA with GUVNL from 2010 as it could not get coal supply on time from the Naini block of Gujarat Mineral Development Corporation.
The court also asked CERC to decide compensatory tariff for power supply to GUVNL by the Mundra plant. GUVNL has filed a review petition in the Supreme Court.
After all these pro-corporate actions, now Gujarat Government’s GUVNL has decided to rectify their steps by approaching the Regulator to withdraw the favourable Order to Adani Power. Many GUVNL officials told Team PGurus that they were aware of this matter and the Government is expected to launch an investigation in this matter.
References:
[1] SBI to take big haircut from ailing Power Company loans? Oct 27, 2018, The Pioneer
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