SC Holds Rajasthan Discoms Liable To Pay Compensatory Tariff To Adani Power Rajasthan Ltd [Read Judgment]

In a huge relief to Adani Power Rajasthan Ltd (APRL), the Supreme Court on Monday repelled the challenge made by a group of power distribution companies from Rajasthan against the approval of compensatory tariff for APRL.A bench comprising Justices Arun Mishra, Vineet Saran and M R Shah upheld the orders passed by the Rajasthan Electricity Regulatory Commission and the Appellate Tribunal for Electricity(APTEL) to the extent they held that APRL was entitled to compensatory tariff in respect of the Power Purchase Agreements (PPA) with the Rajasthan Distribution Companies (Discoms)APRL made the claim for compensatory tariff on the ground that it had to import coal from abroad for the generation of power on account of the unavailability of domestic coal.As per a report, the judgment is estimated to bring Rs 5000 crore gains to APRL.BackgroundIt was in 2006 that the Rajasthan Rajya Vidyut Utpadan Nigam Limited (RRVUNL), the state government-owned power generation company, selected Adani Enterprises Limited (AEL) as its joint venture (JV) partner.In August 2007, a letter of intent (LoI) was issued by RRVUNL in favour of AEL to develop coal blocks under a joint venture at Parsa East and Kente Basan.In March 2008, an MoU was entered into between the Government of Rajasthan and AEL to set up a coalbased Thermal Power Generation Project near Kawai, District Baran, Rajasthan. It was provided that the State of Rajasthan was to make the best efforts to facilitate getting the coal linkage from the Central Government or coal from any other source for the Project.Later, APRL made repeated requests to Rajasthan Govt to allocate coal to its power plant from the Parsa East and Kente Basan coal blocks.As per the then existing coal distribution policy - New Coal Distribution Policy (NCDP) of 2008 - Ministry of Coal had assured 100 per cent of domestic coal to power plants. Therefore AEL urged Rajasthan Government to persuade Central Government to allocate a coal block for its plant at Kawai.Meanwhile, the Rajasthan Distribution Companies initiated bidding process for procuring power from private generators.On 28.1.2010, APRL executed the PPA with three discoms - Jaipur Vidyut Vitran Nigam Limited, Jodhpur Vidyut Vitran Nigam Limited, and Ajmer Vidyut Vitran Nigam Limited -, for the supply of aggregate contracted capacity of 1200 MW.In 2013, the Centre had notified the New Coal Distribution Policy, for the revised arrangement for the supply of coal to identified thermal power stations . AEL was not one of the thermal power stations included in the same.In 2013, APRL made a claim before the State Electricity Regulatory Commission for compensatory tariff on the ground that it had to generate power by using coal imported from Indonesia, which was expensive than domestic coal, as its efforts for getting coal block allocation or coal linkage did not succeed.The State Commission allowed the claim of APRL in 2018. Dissatisfied with the order passed by the State Commission, Rajasthan Discoms filed an appeal before the Appellate Tribunal for Electricity. The APTEL vide judgment dated 14.9.2019, held that the bid of APRL was based on domestic coal and accordingly covered under the Change in Law event in terms of the PPA.Challenging these orders of State Commission and APRL, the Rajasthan Discoms appealed to the SC.Arguments of appellantsSenior Advocate Aryama Sundaram, appearing for the appellants, primarily contended that the use of imported coal was covered by the tariff quoted by APRL as per its bid. It was also argued that the change in coal distribution policy of the Centre Government in 2013 cannot be regarded as a "change in law" as contemplated under the PPA.It was further stressed that any compensation paid to APRL would have to be recovered from the consumers; therefore, it affects the public interest.Advocate Prashant Bhushan also appeared in the matter, supporting the appellants, as the counsel for All India Power Generators Federation.Arguments of APRLSenior Advocates Dr. A M Singhvi and Arvind P Datar appeared for APRL.They argued that the bid was based on domestic coal and that the nonavailability of domestic coal is a change in law event.They also relied on the precedent Energy Watchdog v. Central Electricity Regulatory Commission and Ors., (2017) 14 SCC 80 in which it was held that changes in domestic coal regime will qualify as "change in law".What the SC held?The SC accepted APRL's contention that the bid was based on domestic coal only."When we consider the documents on record, it is apparent that APRL's bid was premised only on domestic coal. It was evaluated as such, and the PPA also records the same", the bench said in the judgment of which the author is not made clear."Various documents and the PPA make it clear that its bid was premised on domestic coal and approved tariff was based on domestic coal, the order of RERC is final, conclusive, and binding on the parties;...

SC Holds Rajasthan Discoms Liable To Pay Compensatory Tariff To Adani Power Rajasthan Ltd [Read Judgment]

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SC Holds Rajasthan Discoms Liable To Pay Compensatory Tariff To Adani Power Rajasthan Ltd [Read Judgment]

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