The Ministry of Power is likely to a revise standard case-I and case-II bidding document, on a prospective basis wherein a provision to cushion unforeseen fuel price fluctuations for power producers to be addressed. Such changes will apply only to upcoming projects and not those that have already been awarded.
Under Case-I bidding the onus lies more on the developer than on the government. In such case a developer needs to decide the location, fuel and technology for the proposed power plant, get all the requisite clearances and acquire land for the same. Here, In Case-II bidding, the developer has to bid on the basis of a specific location and fuel. The government facilitates acquisition of land and clearances, and signing of power purchase agreements.
Companies like Tata Power, Reliance Power, JSW Energy and Adani Power are facing the brunt of the Indonesian government’s decision earlier this year to link coal exports from the country to international prices. The decision will significantly increase the players’ fuel costs and even make some of their projects unviable.The developers have written to the power ministry seeking a revision of tariffs owing to the rise in the price of coal.For example, at the time of bidding for the 4,000 mw ultra mega power project (UMPP) at Mundra in 2006, Tata Power had quoted non-escalable energy charges of 55%, while 45% was escalable.
It appears unbelievable as against the Central Electricity Regulatory Commission’s estimate of a 3.47% increase, coal prices have gone up 131% since then, Anil Sardana, managing director, Tata Power, had told DNA in an interview earlier this month.In just the last one year, the price of coal futures on New York Mercantile Exchange has risen 22% to $75.3/tonne.
Morgan Stanley and Deutsche Bank have in their reports dated September pegged Tata Power’s annual losses at Mundra as a result of the increase in coal prices following the policy change in Indonesia at Rs480-600 crore. The company holds 30% in two mines — PT Kaltim Prima Coal and PT Arutmin — and a coal trading company in Indonesia, all owned by PT Bumi Resources Tbk.
Most SEBs are saddled with huge debt. Tamil Nadu chief minister J Jayalalithaa recently sought a `40,000 crore bailout to make good Tamil Nadu State Electricity Board’s losses.