SC ruling: Adani Power can recover Rs 5,000 cr from Rajasthan SEB

New Delhi, Sep 1: The Supreme Court on Tuesday upheld the rulings of the Rajasthan Electricity Regulatory Commission (RERC) and the Appellate Tribunal for Electricity (Aptel) that had allowed Adani Power’s 1,320-MW Kawai power plant to recover the additional cost incurred by it on importing coal, as the Rajasthan government could not keep its promise of making arrangements for domestic fuel supplies for the plant. The loss is estimated by the company at over Rs 5,000 crore (Rs 1,221 crore per annum between late 2013 and 2018 end).

After the RERC and Aptel rulings in May 2018 and September 2019, respectively, the power distribution companies (discoms) of Rajasthan have already paid more than Rs 2,400 crore provisionally to the company, against its claim for compensation.

The Kawai power plant was erected on the basis of a memorandum of understanding between Adani Power and Rajasthan, where the state assured support to get coal linkage from the central government. The power purchase agreements (PPAs) were signed in 2010 and the plant was commissioned in 2013. 

However, it was only in 2018 when the firm could formally sign supply agreements with Coal India (CIL) subsidiaries for receiving domestic fuel under the 2017 Shakti policy.

Rajasthan could not supply coal to the plant from its captive Parsa East and Kante Basan mines due to inadequate production. The power plant was also not able to procure long-term fuel supply contracts with CIL despite repeated requests to the Union coal ministry.

The RERC and Aptel orders had relied on the April 2017 Supreme Court ruling that widened the ambit of the “change in law” (CL) provision in PPAs by including changes in government policies — in this case, the 2013 amendments to the coal distribution policy. Adani Power had claimed that if it were to keep the power tariff at the PPA rate of Rs 3.24 per unit even after it was forced to import (costlier) fuel, it would lose Rs 1,221 crore per annum.

The three-judge Bench headed by Justice Arun Mishra, however, did not accept the submission of All India Power Engineers Federation — represented by Prashant Bhushan — regarding over-invoicing of imported coal in this matter, Financial Express reported. 

As many as 40 coal importers, including a few Adani Group firms, are currently under investigation by the Directorate of Revenue Intelligence concerning alleged over-invoicing. The letter of rogatory was also issued, but no ultimate conclusion has been reached in the investigations yet. “Thus, we are of the opinion that until and unless there is a finding recorded by the competent court as to invoicing, the submission cannot be accepted,” the apex court noted.

Owing to the April 2017 ruling by the Supreme Court, power plants in Mundra, Gujarat, run by Adani, Tata and Essar are eligible for higher tariffs to allow pass-through of future fuel price escalation of imported coal. Adani Power had already signed supplementary PPA with Gujarat to receive higher tariffs for expensive imported coal. However, after taking into account the fall in global coal prices, the state has recently decided to revise the terms and conditions of the new supplementary agreements, where the tariff calculation will be done on the basis of fresh parameters.

https://www.financialexpress.com/industry/sc-ruling-adani-power-can-recover-rs-5000-cr-from-rajasthan-seb/2072058/