Sparking no digs at the BJP-led state government, Congress MLAs have alleged that the ruling party has been purchasing power from Adani Power Limited (APL) at triple the rate agreed upon in 2007. Congress MLAs voiced their observations at the Gujarat Assembly, pointing out the Power Purchase Agreements (PPA).
The Indian Express reported that the government, in response, insisted that the original PPAs were amended through supplemental PPAs (SPPAs).
For context, the government, through state enterprise Gujarat Urja Vikas Nigam Limited (GUVNL), had an agreement with Essar Power Gujarat Limited (EPGL), Adani Power Mundra Limited (APMuL) and Tata Power Company Limited in 2007 to purchase power.
The Indian Express report explains that EPGL falls in the province of GERC (Gujarat Electricity Regulatory Commission). APMuL and TPCL come under CERC (Central Electricity Regulatory Commission) for the terms and conditions of such agreements. The regulatory commissions adjudicate tariff hikes.
The PPAs puts down aspects of purchasing power, including prices and technical aspects like gross station heat rate or gross calorific value. Change in conditions is modified through SPPAs.
According to a GERC official, The Indian Express report adds, rates are negotiated with gencos to lower the amount that consumers pay for electricity while factoring in the cost viability and ability to generate enough cash flow for generators to maintain production.
The three gencos signed SPPAs over time, revising several of the original PPAs’ terms. According to a GERC official, EPGL is currently negotiating the terms of its fifth SPPA.
Indonesia modified its coal import laws in 2010, which resulted in an increase in the pricing structure. Because they could not pass on the increase in coal prices to the procurers, gencos, who operated power plants using imported coal, said the viability of operating their plants was becoming increasingly difficult.
Following recommendations of the Gujarat government’s high-power committee in 2018, it was decided that the hike in coal prices would be partially passed to consumers.
Import of coal was inevitable to meet the shortfall in domestic consumption.
The Directorate of Revenue Intelligence (DRI) probed companies like Adani Power and four others for reported overvaluation of coal imports and over-invoicing, The Indian Express report highlighted. A GERC official explains to the paper that the pricing of coal differs on the rates the importing trader charges.
The Ministry of Power reported in May 2022 that “lack of clarity on compensation” was why some gencos refused to import coal for blending. It directed state governments to ensure that all gencos operating under them immediately import coal, as well as state electricity regulatory commissions, or SERCs. Additionally, it directed CERC to take the necessary steps to permit greater blending with imported coal. This directive became crucial when a SERC declined to permit a passthrough of the higher cost of coal resulting from blending, which would have otherwise trickled down to consumers.
The May 2022 communication also stated that gencos must complete provisional billing on a weekly basis to allow them to import coal with sufficient cash flow, and procurers must pay at least 15% of the provisional bill within one week of the bill’s receipt.
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