Maharashtra cabinet on Wednesday gave its approval to the state-run Maharashtra State Electricity Distribution Company (MahaVitaran) to repudiate its power purchase agreement (PPA) with Coastal Gujarat Power Ltd (CGPL), an arm of Tata Power if the power drawal from Mundra ultra mega power project (UMPP) becomes unviable at any point of time. The repudiation will be done without any compensation to CGPL.
The MahaVitaran can explore this option after the Mundra UMPP tariff is revised following the Central Electricity Regulatory Commission's (CERC) approval to the compensatory tariff as suggested by the Deepak Parikh Committee. It has recommended compensatory tariff of 56 paise per unit. The tariff will be adjusted for profits that Tata Power earns from its coal mines in Indonesia.
State cabinet also cleared MahaVitaran's plea allowing it to file its affidavit before CERC which is currently hearing the case in this regard. The cabinet asked MahaVitaran to strongly put up its case before CERC even renegotiate its PPA before resorting to the repudiation on the grounds of unviability.
A senior minister told Business Standard ''If the tariff becomes unviable, Maha Vitaran can repudiate its 25 year long PPA with CGPL for the purchase of 800 MW. MahaVitaran today informed the cabient that it will have to bear an additional burden of Rs 300 crore annually if the compensatory tariff of 56 paise is accepted."
As reported by BS in October, MahaVitaran has argued that CGPL should cut the return on equity (ROE) in a bid to give relief ultimately to its consumers. ''CGPL is earning a ROE of 35 paise a unit. Besides, MahaVitaran wants that the lenders of CGPL should also agree to reducing the interest rate and that the relief be passed on to procurers,'' the minister informed.
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