The government will declare revised guidelines for upcoming coastal-based ultra mega power projects (UMPPs) in the next three or four months to factor in the unforeseen escalation in fuel costs. The spurt in fuel prices has impacted existing two UMPPs at Mundra in Gujarat and Krishnapatnam in Andhra Pradesh — both coastal projects.
The ministry of power will soon refer the matter to an empowered group of ministers (EGoM) headed by Finance Minister Pranab Mukherjee to take a final call on the matter. The discussion for revised guidelines for new projects based on imported coal has already started, a senior official in the power ministry told Business Standard. Two rounds of meetings had taken place between developers, procurers and the ministry on the issue, the official added.
The development came after Tata Power and Reliance Power wrote to the ministry asking for a price revision for their Mundra and Krishnapatnam UMPPs respectively, because of a change in the policy in coal pricing by the Indonesian government.
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All the new suggestions put forward by the ministry combined with the earlier opinion by the law ministry, the Planning Commission and an international legal expert would be forwarded to the EGoM for the final decision, the official said. The new guidelines would not be applicable retrospectively, but only to the new projects. The ministry is planning an imported coal-based project in Cheyyur in Tamil Nadu, for which the bids would be called in some time after getting the environment ministry’s clearance for coastal regulatory zone.
However, the power ministry has decided not to interfere in the matter and has written to the procurers to discuss the matter with the developers and arrive at a consensus.
The current power purchase agreement (PPA) for UMPPs excludes fuel from the force majeure provisions. Fuel, instead, is mentioned under Clause (a) of Article 12.4 of the PPA that lists out the ‘Force Majeure Exclusions’. Besides, the ‘Non-natural Force Majeure events’ specified in the PPA does not include actions by a foreign government.
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Both Tata Power and Reliance Power had won the bids for Mundra and Krishnapatnam on international competitive tariff-based bidding. While Tata quoted Rs 2.26 per unit, Reliance had quoted Rs 2.33 a unit.
The companies are asking for a price revision now because of the escalating costs in the import of coal following Indonesia’s decision to benchmark coal prices to the international market. The first unit of the Mundra project will be commissioned in the next four months. However, Reliance Power has stopped work at its Krishnapatnam project, according to the Central Electricity Authority.
The Mundra UMPP will supply power to seven procurers in Gujarat, Maharastra, Punjab, Haryana and Rajasthan. The power from the Krishnapatnam UMPP will be supplied to 11 procurers from four states — Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.