Gujarat withdraws coal import-linked relief

Gujarat withdraws coal import-linked relief

Gujarat has withdrawn an earlier order that allowed three imported-coal based utilities to charge higher electricity tariffs, citing current historically low international coal prices. The decision could raise costs for the private-sector utilities and lead to operational uncertainties for the projects - Adani Power's 4.62GW and Tata Power's 4GW plants, both located at Mundra, and the 1.3GW Salaya project run by Essar Power - until the government signs supplementary contracts for purchasing power.

The state passed an order in December 2018 following broad recommendations by a three-member expert panel to provide some tariff relief to the three plants that run on imported coal. The order came as the plants faced financial difficulties following a regulatory change in Indonesia in 2012 that led to a rise in the supplier country's coal costs, prompting the utilities to seek higher tariffs.

But the sharp fall in imported coal prices over the past few months prompted Gujarat's energy department to state last week that the order is "not fulfilling its objective and purpose" of protecting consumer interests.

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