SC Allows Adani Power’s Claim for Compensatory Tariff from Rajasthan Discoms

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On 31 August 2020, the Supreme Court repelled the challenges against Adani Power Rajasthan Ltd. by a group of power distribution companies. It considered the approval of compensatory tariff.

Brief Facts of the Case

The Rajasthan Rajya Vidyut Utpadan Nigam Ltd. decided to get into a joint venture with Adani Enterprise Ltd. A letter of intent to develop coal blocks under a joint venture was issued in favour of AEL by RRVUNL. Then, the Government of Rajasthan and AEL entered into an MoU to set up a coal-based Thermal Power Generation Project. The MoU stated that the Government of Rajasthan had to put in their best efforts to help to get coal from any source, be it the Central Government or a private entity, for this project.

Given this, the ARPL requested the Government for the allocation of coal from two coal blocks. In the meantime, the New Coal Distribution Policy (of 2008) was issued. In this, the concerned Ministry assured 100 per cent domestic coal to power plants. Hence, AEL asked the state Government to get coal block from the Central Government for the project. Meanwhile, a bidding process was initiated by discoms in the state for the procurement of power from private generators.

A PPA was executed in 2010 between the APRL and three discoms of the state of Rajasthan. This was for a supply of 1200 MW. But, when the Central Government notified a new NCDP with a list of identified thermal plants which would be supplied with coal, AEL didn’t make the list.

The Claims Made by the Parties

A claim was made by APRL in 2013 for compensatory tariff before the State Electricity Regulatory Commission. The ground for such a claim was that the coal they had to use to generate power was procured from Indonesia as it failed to buy it from the state or centre. This imported coal was more expensive than the domestic one. The Commission accepted the claim. The discoms moved to the APTEL against this ruling. The APTEL agreed with the Commission. They stated that it was covered under the provision of Change of Law even PPA. This also has now been appealed against by the discoms in the SC.

Arguments Made by the Parties

The appellant discoms argued that the tariff quoted by APRL in its bid covered this imported coal. Further, this shift from domestic to imported coal is not a change in law under PPA. Also, if any compensation is paid to APRL it would have to be recovered from the consumers. This would affect the public interest. They also alleged over-invoicing. The attention of the Court was brought to the ongoing investigation by DRI against 80 importers on over-invoicing.

The respondent argued that the basis of the bid was on domestic coal. An aberration due to the non-availability of the same is a change in the law. They relied on the case of Energy Watchdog v Central Electricity Regulatory Commission.

Court’s Observation

The Court stated that looking at the documents of record it is clear that the bid by APRL was based on domestic coal and it was evaluated as such. The documents including the PPA show that the tariff was based on domestic coal.

The Court stated that the order of RERC is final, conclusive, and binding on the parties. It has not been questioned and attained finality. No stand contrary to the same was permissible to be taken by the appellants. The Court also rejected the allegations of invoicing. The Court, but, upon considering the totality of facts of this case reduced the liability of the appellants to do complete justice.

Court’s Decision

The three-judge bench comprising of Justice Arun Mishra, Vineet Saran, and M. R. Shah declared the orders by the Commission and the APTEL to be correct to the extent of holding that APRL was entitled to the compensatory tariff as per the PPA.


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