Cabinet approves revision of PPA with Coastal Gujarat Power Company

The state cabinet, on Thursday, gave its go ahead to the Maharashtra State Electricity Distribution Company (Mahavitaran) to rework the power purchase agreement (PPA) with Tata Power promoted Coastal Gujarat Power Company to draw 760 mw power from its Mundra project. Mahavitaran has a long term PPA since April 22, 2007, with the company for Rs 2.26 per unit tariff.

The revision is necessary, as Maharashtra, along with Gujarat, Haryana, Rajasthan and Punjab, need to approach the Central Electricity Regulatory Commission (CERC) once they approve the revised PPAs at a common tariff with unified conditions. The amendments to the PPA were required so that the Coastal Gujarat Company, which is struggling to run the project due to financial stress, can recover fuel costs through consumer tariffs.

A Mahavitaran officer told the Free Press Journal, “Even if there is a rise in the per unit tariff, it will be still cheaper as Mahavitaran has PPAs with the Maharashtra State Power Generation Company (MahaGenco) with per unit tariff ranging between as low as Rs 1.98 for Koyana hydro and Rs 5.71 for Parali thermal unit 8. Today, the state cabinet gave its approval to rework the PPA and, ultimately, the tariff fixed by the Central Electricity Regulatory Commission will be payable by Mahavitaran.’’

In October 2018, the Supreme Court allowed the Coastal Gujarat Power Company to approach CERC for the approval of an amendment in PPAs. CERC had directed the company to file a petition after reaching a consensus with the customers. CERC has set a precedent by approving the amendment of the PPA for another Mundra asset on the same issue of the escalation of coal prices.

Reduction in electricity duty

The state cabinet decided to reduce the electricity duty charged for industrial use to 7.5 per cent from 9.3 per cent. This aims to make the industrial power tariff competitive with other states. Power Minister Nitin Raut said the state government had collected electricity duty at 9.3 per cent worth Rs 2275.76 crore in 2019-20.

However, with the proposed reduction at 7.3 per cent, the government would mop up electricity duty worth Rs 1835.30 crore. “The government will incur an annual loss of Rs 440.46 crore. It is ready to take a hit, as it wants to provide relief to industrial consumers during the economic downturn and lockdown,” Raut said.

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