Setback for Tatas, Adanis as SC rules out compensatory tariff

“The impugned order is set aside. The only benefit we are allowing is if the force majeure event is related to Indian laws,” the apex court said

The shares of both the power companies slumped to the red zone after the Supreme Court on Tuesday overruled the Appellate Tribunal for Electricity (APTEL) order of compensatory tariff to Adani Power and Tata Power.

Adani Power clocked volume of 1.28 crore shares, a 9.68-fold surge over two-week average daily volume of 13.23 lakh shares.

The top court verdict came on a batch of petitions by NGOs and state discoms, contending that the aligning the export price of Indonesian coal with the global market price does not create unforeseeable circumstances that prevent the power generating companies from fulfilling a contract under the PPAs. In all likelihood, Tata Power will not default on its loans but a lesser company would have put the exposures of lenders in jeopardy. Still, experts said the companies could argue for similar reliefs on fresh grounds - the government's revised coal allotment and tariff norms.

While setting aside the appellate tribunal's judgement as well as the CERC's order, a bench of Justices P C Ghose and R F Nariman said that an unexpected rise in coal price would not absolve the firms from adhering to the contract as they had knowingly taken the risk while submitting their bids.

Several power distribution companies in Rajasthan, Punjab and Maharashtra had moved the apex court challenging the electricity tribunal's decision which had held that power producers were entitled to compensatory tariff and referred the case to the CERC for calculating the compensatory tariff.

However, the details of the court's order are yet to come but the compensatory order being set aside shows no sign of relief for Tata Power and Adani Power. CERC, while rejecting their claim to invoke these clauses, set up a committee to examine their claims.

NEW DELHI, April 11 India's top court ruled on Tuesday that Adani Power Ltd can not charge its customers more to cover a surge in the cost of imported coal, overturning a decision by a power regulator in December.

"The fundamental basis of the PPAs remains unaltered". PPA holders can not wriggle out of long-term contractual agreements, they argued. The Adani Power counter on the National Stock Exchange has recorded a volume of around 85.7 million shares so far in the session.

Tata Power is in a pact to sell power from its 4,000 mw UMPP at Rs 2.35 to five states. Similarly, it also obtained a contract from Haryana Utilities.

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