Adani Power shares rally on tariff hike ruling

MUMBAI (Reuters) - Shares in Adani Power gained as much as 15 percent on Wednesday after regulators allowed the power utility to raise tariffs for electricity on a temporary basis, in a ruling that could boost other firms grappling with erratic fuel supplies.

The Central Electricity Regulatory Commission (CERC) has allowed Adani Power to charge "compensatory" tariffs for electricity from its Mundra plant in Gujarat, until supply conditions improve.

The regulator said Adani should be allowed such a tariff, citing the "unforeseen" events of the rising cost of imported coal from Indonesia, coupled with the shortages of domestic supplies from the state-run Coal India Ltd.

 

"As and when the hardship is removed or lessened, the compensatory tariff should be revised or withdrawn," the regulator said in an order, adding that a committee should be set up to establish the amount of the tariff.

It did not say how long the provision for higher tariffs would run, but added that the supply problem was a "temporary phenomenon and is likely to be stabilized after some time".

An external spokeswoman for Adani Power declined to comment.

The order boosted shares of other power companies, raising hopes for a similar reprieve for them.

India's power sector has struggled with domestic coal shortages and has become increasingly reliant on costlier imports to meet the country's rapidly growing energy needs.

Adani Power shares ended up 9 percent.

A decision on similar cases filed by Tata and Reliance Power could be taken within 10 days or so, S. Jayaraman, a CERC official, told the Indian news channel CNBC-TV 18.

(Reporting by Matthias Williams; Additional reporting by Abhishek Vishnoi; Editing by Clarence Fernandez)