<div>Shares in Adani Power gained as much as 15 per cent on Wednesday, 3 April after regulators allowed the power utility to raise tariffs for electricity on a temporary basis, in a ruling that could brighten the prospects of other power producers like Tata Group and Reliance Power with projects locked in litigation with state utilities after costly coal imports raised electricity costs.</div><div> </div><div>The Central Electricity Regulatory Commission (CERC) has allowed Adani Power to charge "compensatory" tariffs for electricity from its Mundra plant in the west coast state of Gujarat, until supply conditions improve.<br /><br />The regulator said Adani should be allowed such a tariff, citing the "unforeseen" events of the rising cost of imported coal from Indonesia, coupled with the shortages of domestic supplies from the state-run Coal India Ltd.<br /><br />"As and when the hardship is removed or lessened, the compensatory tariff should be revised or withdrawn," the regulator said in an order, adding that a committee should be set up to establish the amount of the tariff.<br /><br />It did not say how long the provision for higher tariffs would run, but added that the supply problem was a "temporary phenomenon and is likely to be stabilized after some time".<br /><br />An external spokeswoman for Adani Power declined to comment.<br /><br />It's been a double whammy for power plants which run on imported coal. While the spike in the prices of imported coal made it commercially unviable for producers to keep their plants humming, the unavailability of domestic linkages is affecting their technical viability.<br /><br />"Imported coal-based plants have had issues of affordability. Within technical limits, blending with domestic coal can help in both optimising performance and lowering costs of supplies. While imports are expensive, the supplies of domestic coal may help better utilisation of the plants. Although there are constraints in domestic coal supplies, the plants may be considered on a case-to-case basis, for which domestic coal blended with imported coal makes good economic sense," says Dipesh Dipu, director- consulting, mining, Deloitte Touche Tohmatsu India.<br /><br /><strong>Read Also: <a href="http://www.businessworld.in/en/storypage/-/bw/power-equation/429879.30752/page/0">Power Equation</a></strong><br /><strong>Read Also: <a href="http://www.businessworld.in/web/guest/storypage?storyUrl=power-pecking-order&CategoryID=0&articleId=413794&version=1.0&journalArticleId=413795">Power Pecking Order</a></strong><br /><br />The three power companies that have to grin and bear it are JSW Energy, Adani Power and Tata Power. These producers invested in imported coal-based plants to skirt the domestic fuel shortage logjam. What they failed to take into account was the sudden increase in the price of imported coal.<br /><br />Seventy per cent of the coal for these plants is imported, but it is the residual 30 per cent which is the real spanner in the works. That's because the coal linkages provided in January 2010 were withdrawn by the coal ministry in April last year. Ironically, the plants now feed only on costly imported coal which has brought down the plant load factor (PLF). The power ministry has requested the coal ministry to restore the linkages provided to these plants so that they can function at an optimum level. Apparently, the coal linkages were withdrawn without its consent, informs a senior official.<br /><br />Adani Power shares were up 13 percent at 12:17 p.m. Shares in Tata Power Company Ltd and Jaiprakash Power Ventures Ltd were up more than 4 percent each.<br /><br />A decision on similar cases filed by Tata and Reliance Power could be taken within 10 days or so, S. Jayaraman, a CERC official, told the Indian news channel CNBC-TV 18.<br /><br /> </div>
