The Supreme Court ruling setting aside a decision of the Central Appellate Tribunal for Electricity, effectively denying ‘compensatory tariff’ to Tata Power and Adani Power, has driven the producers to cut back power supply to Gujarat, citing financial unviability.

The two companies have suspended electricity supplies to Gujarat Urja Vikas Nigam Ltd (GUVNL), the parent of discoms in Gujarat, saying higher imported fuel costs had skewed their financial viability. The companies have begun the phased lowering of supply at the peak of summer.

Gujarat Energy Minister Chimanbhai Sapariya confirmed to BusinessLine that Adani Power and Tata Power had discontinued 1250 MW and about 500 MW supply, respectively. The Ruias-led Essar Power Gujarat Ltd (EPGL), too, has suspended supply owing to higher international coal prices following changes in Indonesian regulations.

Looking for options However, Sapariya ruled out any power shortage in the State as a consequence. “We have sufficient capacities to generate power and alternative sources to procure power from the open market, which is cheaper. The discontinuation will not affect power supply,” he said.

Sources said Essar Power, too, has filed a tariff review petition with GUVNL. If an order similar to the Supreme Court ruling on Tata Power and Adani Power is passed on the EPGL petition, the company may face cash-flow issues, which will impair its ability to service its loans.

Gujarat energy department sources revealed that the Gautam Adani-led power arm had written to the State government citing financial unviability given the higher cost of imported coal, the key fuel for Adani’s Mundra Power plant.

‘Not commercially viable’ In its representations, Adani Power argued that it is not commercially viable to generate power under the current tariff structure after the denial of compensation for the feedstock price escalations.

The demand for compensatory tariff arose after a change of law by the Singapore government, which escalated the cost of coal imported by Adani Power and Tata Power. The Supreme Court said the change of law was not a valid reason to hike power tariffs.

The producers’ hopes now hinge on a favourable ruling by the Central Electricity Commission, which was directed by the apex court to examine their demands for compensatory tariff.

With inputs from Twesh Mishra in New Delhi

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