http://www.business-standard.com/article/companies/cerc-denies-compensation-to-rpower-for-high-diesel-cost-for-operation-of-sasan-umpp-114022400391_1.html

CERC to R-Power: High diesel cost at Sasan your problem

Diesel used to run mining equipment in the captive coal blocks linked to its flagship Project in Madhya Pradesh

 
BS Reporter  |  <news:geo_locations>New Delhi  

February 25, 2014
The Central Electricity Regulatory Commission (CERC) has denied Reliance Power (R-Power) the compensation it had sought for the high cost of diesel used to run mining equipment in the captive coal blocks linked to its flagship Sasan Ultra Mega Power Project in Madhya Pradesh.

 
 
 

 

The Central Electricity Regulatory Commission (CERC) has denied Reliance Power (R-Power) the compensation it had sought for the high cost of diesel used to run mining equipment in the captive coal blocks linked to its flagship Sasan Ultra Mega Power Project in Madhya Pradesh.

The company had petitioned CERC last year, invoking the ‘Change in Law’ clause of the power purchase agreement (PPA). It argued the government’s January 2013 decision on decontrol of diesel prices had pushed up operating costs by an unforeseen Rs 133 crore annually. The argument failed to cut ice with the regulator. “None of the conditions for a matter to be considered as Change in Law are satisfied,” says its order, adding there was no escalation component for diesel price variation attached to the bid price.

Reliance Power was issued the Letter of Intent (LoI) for the Sasan UMPP in August 2007. The company signed PPAs with 14 state distribution companies the same month. Mining equipment consumed over 59,000 Kilo Letre of diesel per annum at three of the mines attached to the project.

The company said in its petition that the Administered Pricing Mechanism (APM) for diesel was discontinued in 2002 on paper but remained applicable in spirit. Therefore, the price of diesel continued to remain subsidized. But, the subsidy on diesel was removed for bulk consumers in January 2013 leading to the extra expenditure on fuel.

CERC said that the policy to dismantle APM and market-linked pricing of diesel was in existence before August 2007 when the project was bid. It added the argument that the government continued to determine retail prices of petroleum products is not tenable as the market was deregulated in 2002 and the private players were free to charge as per their discretion.

In a separate order issued on Friday, CERC asked the company to submit information on the project including date of bid, assumptions for bid of Rs 1.19 per unit, increase in project cost, savings due to purchase of equipment from China and the Return on Equity (RoE) envisaged. The order was passed on a different petition seeking “economic restitution” due to rupee depreciation.

“Reliance Power welcomes the CERC order recognizing the unprecedented and unforeseen foreign exchange rate variations beyond the control of the company and beyond normal expectations may need to be considered for quantification and compensation by the procurers appropriately,” a company spokesperson said.

CERC had noted that the rate quoted by the company is the lowest among all supercritical power projects and that there may be a case for procurers to share a part of the burden on account of Rupee depreciation considering the extremely competitive rate at which the procurers are getting power.

Rupee slide compensation
In a separate order on Friday, CERC asked the company to file information on the project — date of bid, assumptions for a bid of Rs 1.19 a unit, increase in project cost, savings due to purchase of equipment from China and the return on equity envisaged. The order was passed on a different petition, seeking “economic restitution” due to rupee depreciation.

The company had petitioned CERC last year, invoking the ‘Change in Law’ clause of the power purchase agreement (PPA). It argued the government’s January 2013 decision on decontrol of diesel prices had pushed up operating costs by an unforeseen Rs 133 crore annually. The argument failed to cut ice with the regulator. “None of the conditions for a matter to be considered as Change in Law are satisfied,” says its order, adding there was no escalation component for diesel price variation attached to the bid price.

Reliance Power was issued the Letter of Intent (LoI) for the Sasan UMPP in August 2007. The company signed PPAs with 14 state distribution companies the same month. Mining equipment consumed over 59,000 Kilo Letre of diesel per annum at three of the mines attached to the project.

The company said in its petition that the Administered Pricing Mechanism (APM) for diesel was discontinued in 2002 on paper but remained applicable in spirit. Therefore, the price of diesel continued to remain subsidized. But, the subsidy on diesel was removed for bulk consumers in January 2013 leading to the extra expenditure on fuel.

CERC said that the policy to dismantle APM and market-linked pricing of diesel was in existence before August 2007 when the project was bid. It added the argument that the government continued to determine retail prices of petroleum products is not tenable as the market was deregulated in 2002 and the private players were free to charge as per their discretion.

In a separate order issued on Friday, CERC asked the company to submit information on the project including date of bid, assumptions for bid of Rs 1.19 per unit, increase in project cost, savings due to purchase of equipment from China and the Return on Equity (RoE) envisaged. The order was passed on a different petition seeking “economic restitution” due to rupee depreciation.

“Reliance Power welcomes the CERC order recognizing the unprecedented and unforeseen foreign exchange rate variations beyond the control of the company and beyond normal expectations may need to be considered for quantification and compensation by the procurers appropriately,” a company spokesperson said.

CERC had noted that the rate quoted by the company is the lowest among all supercritical power projects and that there may be a case for procurers to share a part of the burden on account of Rupee depreciation considering the extremely competitive rate at which the procurers are getting power.

Rupee slide compensation
In a separate order on Friday, CERC asked the company to file information on the project — date of bid, assumptions for a bid of Rs 1.19 a unit, increase in project cost, savings due to purchase of equipment from China and the return on equity envisaged. The order was passed on a different petition, seeking “economic restitution” due to rupee depreciation.

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Will fight to save Mahan forests from coal mining: MSS

 

Singrauli, MP, Feb 24 : Mahan Sangharsh Samiti (MSS) has declared that they will not allow Mahan forests in Singrauli, Madhya Pradesh to be cut down by Essar for coal mining in spite of the stage II forest clearance granted byEnvironment and Forests Minister Veerappa Moily. 

The clearance granted by the minister tramples over the rights of several thousands of people, who have been dependent on the
forests for their livelihoods for generations,the organisation informed. The fight will now take the shape of a ‘Satyagraha’, in which members of local community and MSS – an organisation of villagers opposing the Mahan coal mining project – will strongly oppose the stage II clearance given to Mahan.”We will do whatever it takes to save our forests. We cannot allow the forest to be cut down. It is our home,” said Virendra Singh, resident of Amelia and member of MSS.

The details of the Satyagraha would be announced at a mass public rally in Amelia Village, Singrauli District on the Feb 27, which is expected to witness a gathering of several thousands of people from at least 12 to 14 villages.

The Mahan Coal Block allocated to Mahan Coal Ltd – a joint venture of Essar Power and Hindalco was given Stage II forest clearance on Feb 12 by Moily. Mining in the forest will lead to loss of over 500,000 trees and impact over thousands of
people in 54 villages, the organisation said. Initially declared a no-go area by the environment ministry, the coal block was opposed by Moily’s predecessors, Jairam Ramesh and Jayanthi Natrajan. Moily has also conveniently even ignored Tribal Minister K.C. Deo, who in June last year had written to the chief minister of Madhya Pradesh about the blatant violation of the Forest Rights Act. Mahan coal block is also under the Central Bureau of Investigation (CBI) scanner because of the sheer opacity in the manner it was allocated to Essar and Hindalco in 2006 as the state government initially opposing the block being given to Essar and then changed its position within just three weeks. “But despite this, Essar has been shamelessly lobbying with the government for speedy environmental clearances,” MSS stated. “We live in a highly distorted form of democracy, where money power rides roughshod over the rights of thousands of people, rendering them helpless. But we won’t let it happen this time. The fight in Mahan would be a historic one. The people of Mahan would show the world that money and power can no longer be abused to flout regulations and violate rights of people,” said Priya Pillai, member of MSS, who is also a campaigner with Greenpeace.

Mahan coal block gets stage 2 forest clearance

The Hindu Bussinessline|NEW DELHI, FEB 13:  

The highly controversial Mahan Coal Ltd has received the stage 2 forest clearance from the Ministry of Environment and Forests for the Mahan coal block in Madhya Pradesh, Essar Energy announced on Thursday. This coal block was allotted in 2006.

Mahan Coal Ltd is held 50 per cent by Essar Power (subsidiary of Essar Energy).

Mahan Coal Ltd will have to sign a mining lease agreement with Madhya Pradesh before commencing operations.

However, green activists expressed discontent with this news. They said this was the latest in the line of the Ministry’s new mandate to extend hasty clearances to infrastructure projects without giving due importance to environmental and social concerns.

According to Priya Pillai of Greenpeace, the project would affect thousands of people in at least 54 villages.

“Despite clear evidence of violations of the Forest Rights Act and other mandatory conditions, Mr. Moily has pushed through Stage II clearance for the Mahan coal block,” Pillai said.

http://www.thehindubusinessline.com/companies/mahan-coal-block-gets-stage-2-forest-clearance/article5684644.ece