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Government gets 10 more days to respond to petition on capping power plants’ fixed cost

The Delhi High Court has given the government 10 more days to respond to a petition filed by one of the winners of the recent coal block auction, which challenged the Centre’s move to put a limit on the fixed cost that power plants can factor in electricity tariffs.

Mandakini Exploration & Mining, a joint venture between Monnet Ispat & Energy and Jindal India Thermal, had alleged that capping of fixed costs after the completion of the coal block auction amounted to “ex post facto”, or retroactive, change in bidding conditions. Because of this, it said, its project won’t be able to service debt.

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The government was required to submit its reply on Friday, but was given extension as it sought more time. The company has been given five days to reply to the government’s submission, sources said.

The court will now hear the petition on May 13

The power ministry recently issued an order to amend guidelines for power procurement by states, under which state power distribution companies in consultation with their regulatory commissions will determine an upper ceiling for fixed costs for every unit of power. The fixed cost will be indicated in advance to all bidders before the distribution companies invite bids for power supply.

All the power companies that won coal blocks in the recent auction have agreed to forgo the mining cost they were allowed to pass on to consumers and instead agreed to pay the government, in what is called negative bidding. The government is worried that the companies may now use some other cost heads to pass on their expenses to consumers and the cap is to prevent any rise in tariffs because of such moves.

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