GERC forces Adani to supply power at Rs 2.35/unit for 25 years

The Gujarat Electricity Regulatory Commission (GERC) on Wednesday asked Adani Power to supply power to Gujarat Urja Vikas Nigam Ltd, the state distribution utility, in accordance with a power purchase agreement (PPA) signed on February 2, 2007.
Under this, Adani Power has to supply 1,000 mw to Gujarat Urja at a tariff of Rs 2.35 per unit for 25 years.

On November 15, 2008, Adani Power requested that the PPA be terminated because of its inability to execute a fuel supply agreement with Gujarat Mineral Development Corporation.

This prompted Gujarat Urja to approach the regulator for remedial action.

Gujarat Urja and a co-petitioner, Amarsinh Chavda, had filed the case on the grounds that the PPA nowhere mentions that the agreement would take place only if GMDC supplies coal to Adani Power.

The GERC in its 126-page order on Wednesday said, “It is difficult to accept that Adani Power did not have the ability to execute the fuel supply agreement because, in fact, they have made statements on the existence of such agreements in their own documents which are in the public domain.”

Chavda claimed the decision would mean a huge financial blow to Adani Power. He estimates this to be around Rs700 crore a year for 25 years, or Rs17,500 crore, considering that the current average rate in the state hovers around Rs4.50 per unit.

An Adani Group official said the company was expecting a judgment favouring Gujarat Urja.

“To cover the losses or future risk, we have started sourcing coal from various locations across the world. Simultaneously, we are also signing contracts in which we will be supplying power to various states and companies in the country,” the official said.

Chavda said as many as 5.5 crore consumers would have had to bear higher electricity charges had the PPA been scrapped.