Reliance Power Seeking Tariff Increase for all UMPPs

Anil Ambani-led Reliance Power, which bagged three of the four ultra-mega power projects (UMPPs) in the country due to aggressive bidding , is now seeking tariff increase for all of its plants. The company is learnt to have approached the Central Electricity Regulatory Commission (CERC) to revise the tariff of TilayiaUMPP inJharkhand to Rs 2.25 per unit, more than 25% increase from its original bid price ofRs 1.77 per unit.

The company has cited seven-fold increase in the cost of Rehabilitation and Resettlement (R&R) by Rs 3,131 crore over the original pre-bid estimates , said sources in the know.

Confirming the move, Vimal Kirti Singh, principal secretary at the Jharkhand government’sEnergy Department , told TOI, “The R&R cost has gone up from Rs 530 crore to over Rs 3,500 crore. And Reliance has requested to revise the tariff to Rs 2.25 per unit for a host of reasons, including the R&R cost. If the tariff is not revised , the project will become unviable.” He was speaking on the sidelines of an industry event in Goa organized by Independent Power Producers Association of India (IPPAI).

The increase in project cost, on account of the substantially higher R&R expenditure , has led most of the lenders to doubt the bankability of the Tilaiya project.

When asked about the failure of UMPPs to deliver power on bid prices, IPPAI director general Harry Dhaul, said, “Our biggest challenge is to provide 24/7 electricity to 1.2 billion people. Competitive bidding should not have happened . If Indonesia increases prices, or cost of production goes up, everyone starts criticizing the producers for things beyond their control. Then you go to CERC, renegotiate PPAs and so on. There are 62 power projects based on MoUs and they are all doing well. The government should either fully regulate the sector or leave it to market forces.”

An e-mail sent to Reliance Power BSE 0.42 % remained unanswered till the time of going to press. Shares of Reliance Power closed up 3% at Rs 67 in a flat Mumbai market on Monday.

R-Power has also sought compensation from the government for the falling rupee and cost escalation due to increase in taxes and input costs for its 4,000 MW Sasan UMPP. The third plant, based on imported coal, is proposed at Krishnapatnam in Andhra Pradeshbut is facing regulatory issues over rise in coal prices and water costs. R-Power has sought a revision in tariff after Indonesia increased coal prices.