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JSA hazards investor smiles after CERC gives tariff increase nod for Adani Power

CERC: High powered stakes
CERC: High powered stakes

The CERC allowed Adani Power to distribute power at a higher tariff in a public private partnership (PPP) with three state power generating entities: Gujarat Urja Vikas Nigam (GUVNL), Uttar Haryana Bijli Vitaran Nigam (UHBVN), and Dakshin Haryana Bijli Vitran Nigam (DHBVN).

JSA Delhi partner Amit Kapur acted for Adani Power which asked for the tariff adjustment citing increased production costs due to “unanticipated and un-absorbable” escalation in the price of Indonesian coal, according to a case summary from JSA.

The CERC held on 2 April that if a power project becomes commercially impracticable and unviable due to circumstances beyond its control, the project may be suitably compensated by higher tariffs.

A statement from the firm stated: “This decision assumes great importance as around 30,000 MW installed capacity (with capex of around Rs 120,000 crores to Rs 150,000 crores and stranded with debt finance of Rs 90,000 crores to Rs 120,000 crores) in India is at risk due to shortage of domestic coal supply and spiralling prices of imported coal.”

Kapur said: “This was quite a seriously debated matter and the CERC in the majority has accepted our contention. [It is] the principle of standard investment – do we turn our faces away from all the investment involved or revive it?” 

Kapur argued the matter after senior advocate CS Vaidyanathan opened arguments and appeared on the first two days of hearings.

Advocate MG Ramachandran appeared for GUVNL, UHDBVN, and DHBVN.

Power sector shares rallied after the decision, which has also been criticised as a potential moral hazard about when and how strongly the CERC would step in next, reported Mint.

Read the CERC's majority order

...and CERC's dissenting, minority order

Corporate law blog analysis on the case

Photo by Skazama

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