Shares of Tata Power jumped over 2 per cent in the afternoon trade, after electricity regulator CERC allowed the company to raise power tariffs to compensate for an unexpected increase in coal cost.

Cheering the news, shares of Tata Power opened higher and further jumped 2.23 per cent to Rs 96.75 as the trade progressed on the BSE. On the NSE, the stock spurted by 2.3 per cent to Rs 96.20.

“Though the compensatory tariff is positive for Tata Power, it is contingent on the committee’s decision as well as the extent of coal profit to be shared,” Edelweiss Research said in a report.

Welcoming the Central Electricity Regulatory Commission (CERC) order, Tata Power had said: “This decision of the CERC is an important step in resolving the major impasse affecting imported coal-based power projects in the country that got impacted due to extraneous factors well beyond the control of developers.”

CERC has asked states that buy electricity from Tata Power’s 4,000-MW Mundra plant in Gujarat to form an expert panel to decide on compensating the firm for higher cost of coal imports from Indonesia.

With domestic coal production lagging demand, utilities like Tata Power and Adani Power have little choice other than bringing in costlier coal that would mean higher electricity cost.

Coastal Gujarat Power Ltd, a wholly owned subsidiary of Tata Power, had petitioned CERC seeking relief on account of adverse impact of the unforeseen, uncontrollable and unprecedented escalation in imported coal prices.