News Detail

• Adani Power Maharashtra Ltd (APML), a subsidiary of Adani Power Ltd, wants to terminate the power purchase agreement (PPA) it signed with state-owned distribution utility Mahavitaran Ltd due to “reasons beyond the company’s control”.The company won’t be able to use coal from the captive block allotted to it for environmental reasons. It has offered to supply power at a higher price than agreed in the PPA.The move raises a question mark on power supply from Adani Power’s 3,300MW Tiroda power project in the state’s Gondia district and means the state government may be unable to meet its target of ending power cuts in Maharashtra by the close of 2012.

• The first 660MW unit of APML’s Tiroda power plant was scheduled to be commissioned in August and another 660MW unit by December. Maharashtra has been reeling under a power shortfall of 4,500-5,500MW for more than a decade, with power cuts ranging from four hours in urban areas to 12 hours in rural areas. The shortfall has been narrowed to around 3,000MW in the last one-and-a-half years due to the availability of power from various sources.

• The state government had expected that this year an additional 3,000MW power would become available from private power producers and state power generation firm Maharashtra State Power Generation Co. Ltd (Mahagenco), which included 1,320MW from Adani Power’s plant at Tiroda. APML cited unforeseeable circumstances for wanting to terminate the agreement in its letter to Mahvitaran, which has been reviewed by Mint.

• The company said the ministry of environment and forests (MoEF) has denied clearance required for access to captive coal from the block allocated by the coal ministry at Lohara in the Chandrapur district of Maharashtra. MoEF said the allocated coal block is in the buffer zone of the Tadoba tiger reserve.

• The company signed the PPA to supply power at Rs.2.64 per unit based on the allocation of the coal block. Without an alternative coal block being allocated, it would not be possible for the company to meet the commitments made in the PPA, the letter said. The company, however, said it would be willing to supply power generated by imported coal or that obtained through other sources (such as electronic auctioning), provided Mahavitaran is ready to pay more.

• Maharashtra deputy chief minister Ajit Pawar, who holds the energy portfolio, said, “Our internal consultation process is on and we have not taken any final decision on this issue.”An external spokesperson for Adani Power said, “Our client would not like to comment on the issue.”At a meeting with Prime Minister Manmohan Singh on 18 January, private power generation firms’ chief executives had demanded clarity on the issue of so-called “go” and “no-go” areas as far as coal mining is concern. Due to ambiguity on the issue, environmental clearance for many coal blocks has either been withheld or cancelled.

• In a similar case, Mahavitaran refused to terminate the PPA signed with JSW Energy Ltd. JSW also wanted the accord cancelled because of reasons beyond its control. It subsequently approached the Maharashtra Electricity Regulatory Commission (MERC), which ruled in favour of Mahavitaran in November last year.

• Industry bodies and consumer organizations hold divergent views on the subject.“Why should the investor suffer due to the ambiguity in government policies,” said Ashok Kumar Khurana, director general of the Association of Power Producers (APP). “The solution to the issue is that the investor should be allowed to run power plants on coal sourced through other sources and he should be able to pass on the additional cost to the buyer.”Shantanu Dixit of Pune-based think tank Prayas Energy group, which undertakes research on issues related to energy policy, said, “If the state government allows scrapping of the PPA or usage of fuel sourced through other sources and passing of additional cost to Mahavitaran, it would take away the sanctity of the process of competitive bidding.”

• Adani Power faced a similar situation with its Mundra project, said Ashok Pendse, MERC’s designated consumer representative. “However, Gujarat Urja Vikas Nigam Ltd, the Gujarat government-owned power distribution utility, rejected Adani’s plea for scrapping of the PPA and it was subsequently upheld by the Gujarat Electricity Regulatory Commission and the Appellate Tribunal for Electricity,” he said. “When a power generator participates in competitive bidding of any distribution utility, he also takes the responsibility of sourcing the fuel. How can he later on pass his responsibility to someone else?”

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