Power shock in the offing in Gujarat

Get ready to shell out more for electricity as the Gujarat government has approved private power generators to pass-through higher cost of coal to end consumers. It is estimated that power will become pricier by 12 to 15% in the state following the approval, which brings great relief to Tata Power, Adani Power and Essar Power, which own imported coal-based projects in the state.

These companies have signed long term power purchase agreements with Gujarat, and some other states. They had been pressing for increase in power tariff after imported coal price shot up due to change in Indonesian regulations. In view of a CERC directive, the state government formed a high-powered committee, to suggest a road-map. The panel recommended the pass-through.

A senior Gujarat government official said that the proposal was approved by the state cabinet during its meeting on Wednesday.

"The Gujarat Urja Vikas Nigam Limited (GUVNL) will sign fresh power purchase agreements with these private power producers, and seek Central Electricity Regulatory Commission's approval. Our estimate is that consumers will have to pay 40-80 paise more per unit once the approval is received," said a senior government functionary.

Energy minister Saurabh Patel avoided to make any comment for the story.

The three private companies are among the largest suppliers of electricity to Gujarat. Adani has signed PPA to supply 1,000 MW to GUVNL at Rs2.35 per unit and another 1,000 MW at Rs2.89 per unit. Tata has PPA to supply 1,920 MW at Rs2.42 / unit, and Essar 1,000 MW at Rs2.52. The tariff could rise significantly as a result of the government decision.

However, government officials insist that the resulting burden would still be lower than that on account of buying costlier power from other sources.

"GUVNL is buying power for as much as Rs7 per unit to meet power requirement. The revised tariff even after the pass-through to the three companies will be significantly lower than this," he said.

But, energy expert KK Bajaj said that the pass-through would lead to additional burden of more than Rs3,000 crore on power consumers in a year.While Gujarat has paved the way for higher tariff, Rajasthan, Maharashtra, Punjab and Haryana are yet to do so.

Tata Power said that it welcomes the Gujarat government's move to accept the high-powered committee's recommendations, "in giving some relief to Mundra Ultra Mega Power Project".

The company said that it expects to get consent of other four procurer states and, amendment to PPAs based on the committee's recommendations. It would then seek necessary approvals from CERC as per Supreme Court's directions.

According to officials, in case these projects were shut down, replacing such huge capacity with alternate sources, or establishing new plants, would not be feasible. It would also have meant writing off the massive investment made by the power producers.