Fuel sourcing is Adani Power’s responsibility: APTEL

Ruling against Adani Power’s move to terminate its power purchase pact with Gujarat state utility GUVNL on the basis of higher coal prices, the top electricity tribunal has said that sourcing of fuel is the responsibility of the seller and not the buyer.

Adani Power had cancelled the 25-year power purchase agreement with Gujarat Urja Vikas Nigam Limited (GUVNL), citing that it would not be possible to supply electricity at the earlier agreed tariff of Rs 2.35 per unit due to expensive coal prices.

The Appellate Tribunal for Electricity (APTEL) verdict, which could set a precedent in the country’s power sector, comes at a time when many power producers are seeking higher tariffs amid rising coal prices.

The tribunal’s ruling came in response to Adani Power’s appeal against a Gujarat Electricity Regulatory Commission (GERC) decision that power purchase agreements (PPA) cannot be terminated on the basis of the argument that the company was not getting domestic coal supply.

Queries sent to Adani Power seeking comments on the verdict remained unanswered. However, a research report suggested that the company might appeal against the tribunal’s verdict in the Supreme Court.

In 2007, Adani Power had inked a PPA with Gujarat Urja Vikas Nigam Limited for supply of 1,000 MW power at a tariff of Rs 2.35 per unit.

However, in December, 2009, Adani Power decided to terminate the pact, asserting that it could not get domestic supply, making the proposition of supplying electricity at the agreed tariff unviable, especially since imported coal is costlier.

Adani Power was mainly relying on coal supply from Gujarat Mineral Development Corp’s mines in the Morgha block in Chhattisgarh, but the same did not materialise.

As per the tribunal, the PPA was not based on the assumption that Adani Power would get coal from only GMDC.

Noting that it was Adani Power’s responsibility to make arrangements for fuel supply, the order has said the pact termination is not valid.

It was for the appellant (Adani Power) to arrange the coal from any source. It was Adani Enterprises Limited which had represented that it had tied-up with GMDC for supply of coal.

“It also represented that it had tied up for supply of imported coal with various companies in Germany and Japan as a source of fuel supply. Therefore, it is for the appellant to make arrangements for fuel from any source,” the tribunal noted.

The electricity is to be supplied from Adani Power’s 2x660-MW Mundra-II facility.