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Rs 1.9 lakh crore benefit to power companies post Gujarat bailout

Posted On : November 17, 2018

New Delhi: Two consumer-interest NGOs, the original applicants in the 2017 Supreme Court case challenging tariff hike allowed to Tata, Adani and Essar group powerplants in Gujarat, have told the apex court that the bailout package recommended by a state government panel would extend Rs 1.9 lakh crore benefit to the power producers at the cost of consumers. 

In separate affidavits to the apex court, Energy Watchdog — which was the original applicant in the 2017 case — and Prayas said even a hike of a few paise will make a huge amount since the projects have a combined capacity equivalent to generating 6,328 crore units of power in a year. Energy Watchdog said a Re 1 per unit hike will result in Rs. 1.9 lakh crore extra payment to these power projects over a period of 30 years. 

They said the financial distress of power plants can be resolved through the Insolvency and Bankruptcy Code mechanism in the best interest of all stakeholders.

The issue of allowing higher tariff to the power plants located at Gujarat’s Mundra has once again come up in the SC after the state government earlier this month sought the court’s consent to implement the recommendations of the panel headed by former SC judge Justice R K Agrawal. The issue is scheduled to come up in the SC on Monday. 

After the SC had struck down higher tariff in April last year, the state government set up the panel for suggesting a bailout package for the three imported coal-based power plants with combined outstanding debts of Rs 22,000 crore. The panel had also called the NGOs for their views. 

Among other measures, the panel recommended allowing the promoters to fully pass on the increased fuel costs, extending the PPA and lenders taking haircuts. The recommendations are akin to relief in the regulatory rulings that the SC had struck down.

The NGOs have said opening a special window for the three projects established in a particular state will send a wrong signal and have a cascading impact on all PPAs signed across the country based on tariff-based bidding. 

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  5. All India Power Engineers Federation on Tuesday condemned the central government''s move to amend the National Electricity Policy "to facilitate privatisation". According to a statement by the AIPEF, the proposed changes require extensive discussions as such time for submission of comments should be six months. When fundamental changes are being introduced by way of privatization of the power sector, there is no basis to rush through more so under extreme distress caused by the COVID-19 pandemic, it said. "All India Power Engineers Federation (AIPEF) condemns the government of India''s move to amend the National Electricity Policy to facilitate the privatization of the power sector," the statement said. The body alleged that this is a clear attempt to introduce privatization through the backdoor and deserves to be scrapped. The purpose of the central government is not to review or revise the existing National Electricity Policy but the total replacement of existing policy with a new policy to be recommended by the expert group so as to achieve privatization, the body alleged. As per Electricity Act 2003, National Electricity Policy is to be prepared in consultation with the state governments and Central Electricity Authority (CEA), a statutory body. However, the body said that the CEA is not included in the proposed schedule of discussion. Further, only 5 states have been included in an expert group instead of all the states, it added. K Subramanian, Chief Economic Adviser, has stated that India is the only country that readily implemented a slew of reforms and used this crisis to herald a change in India''s economic thinking, it said. The strategy of government seems to be “never waste a crisis” and use the crisis of pandemic to streamroll so-called reforms by way of privatizing, it alleged. The draft proposal is of serious nature for which the present situation of a pandemic is a serious constraint, it stated. The Ministry of Power has once again found peak pandemic time as an opportunity in crisis to launch the draft amendments to National Electricity Policy, it lamented. Once the draft policy is finalised, the notified policy would have the status of “subordinate legislation”, and for this reason, the matters need to deliberate as in the case of the legislation itself or as in the case of amendment in the Act itself, it opined. Draft national electricity policy is pushing for more private participation in the power sector and launching sell out of public assets as at Chandigarh and Dadra Nagar Haveli, it noted. The preferred route being suggested are failed models like the franchisee system, transferring distribution responsibility to a private party, and separation of carriage (lines) and content (supply) business, it opined. Since the existing Policy is in force since February 2005 there was no emergency to totally replace it, while power engineers and workers as front line workers are already stressed in maintaining power continuity, it added All India Power Engineers Federation on Tuesday condemned the central government''s move to amend the National Electricity Policy "to facilitate privatisation". According to a statement by the AIPEF, the proposed changes require extensive discussions as such time for submission of comments should be six months. When fundamental changes are being introduced by way of privatization of the power sector, there is no basis to rush through more so under extreme distress caused by the COVID-19 pandemic, it said. "All India Power Engineers Federation (AIPEF) condemns the government of India''s move to amend the National Electricity Policy to facilitate the privatization of the power sector," the statement said. The body alleged that this is a clear attempt to introduce privatization through the backdoor and deserves to be scrapped. The purpose of the central government is not to review or revise the existing National Electricity Policy but the total replacement of existing policy with a new policy to be recommended by the expert group so as to achieve privatization, the body alleged. As per Electricity Act 2003, National Electricity Policy is to be prepared in consultation with the state governments and Central Electricity Authority (CEA), a statutory body. However, the body said that the CEA is not included in the proposed schedule of discussion. Further, only 5 states have been included in an expert group instead of all the states, it added. K Subramanian, Chief Economic Adviser, has stated that India is the only country that readily implemented a slew of reforms and used this crisis to herald a change in India''s economic thinking, it said. The strategy of government seems to be “never waste a crisis” and use the crisis of pandemic to streamroll so-called reforms by way of privatizing, it alleged. The draft proposal is of serious nature for which the present situation of a pandemic is a serious constraint, it stated. The Ministry of Power has once again found peak pandemic time as an opportunity in crisis to launch the draft amendments to National Electricity Policy, it lamented. Once the draft policy is finalised, the notified policy would have the status of “subordinate legislation”, and for this reason, the matters need to deliberate as in the case of the legislation itself or as in the case of amendment in the Act itself, it opined. Draft national electricity policy is pushing for more private participation in the power sector and launching sell out of public assets as at Chandigarh and Dadra Nagar Haveli, it noted. The preferred route being suggested are failed models like the franchisee system, transferring distribution responsibility to a private party, and separation of carriage (lines) and content (supply) business, it opined. Since the existing Policy is in force since February 2005 there was no emergency to totally replace it, while power engineers and workers as front line workers are already stressed in maintaining power continuity, it added