Power projects that had planned to get coal from Indonesia are yet to find a solution to the new law there that increased their costs and upset their viability calculations, even as the regulation that did all this took effect on Monday.
The new regulation says coal sold from the country is to be indexed to the international price and revised annually.
Among the high-profile projects facing uncertainty is Tata Power's ultra mega power project (UMPP) in Mundra (Gujarat), which is to commission its first unit of 800 Mw this month. Reliance Power's UMPP at Krishnapatnam (Andhra), where site work is yet to begin, is also awaiting clarity on what to do. Both companies have made representations to the power ministry.
Adani Power’s 4,000 Mw project at Mundra would also see cost escalation on the fuel side. Estimates say projects of this size will lose Rs 2,000 crore annually due to fuel price fluctuations.
The ministry of power has yet to come up with a decision on a request made by the Association of Power Producers (APP) to allow them to pass on increased fuel prices to buyers. Senior electricity authorities say a decision on this matter now rests with individual power procurers, mostly state-owned power utilities. “If they feel they need the power contracted to them, they can make the decision,” said Pramod Deo, chairman of the Central Electricity Regulatory Commission (CERC).
Experts note there is now provision in the law which allows a company to pass on escalation of fuel costs after a contract has been signed.
The imported coal-based projects of both Tata Power and Reliance Power were awarded after competitive bidding. The winning companies were to shoulder the responsibility to arrange coal from an international location and made bids based on these. Both had acquired coal assets in Indonesia.
Anil Razdan, an energy consultant and a former secretary with the Union ministry of power, said concessions should be offered to these projects to facilitate timely implementation.
