With the West Bengal State Electricity Distribution Company (WBSEDCL) approaching the Appellate Tribunal for Electricity (Aptel) against the Central Electricity Regulatory Commission (CERC) ruling that accorded Indian Railways (IR) a deemed licensee status under the Electricity Act, the Dabhol deal with the railways faces a serious legal challenge that will hit both IR as well as the Dabhol revival package.
Under the CERC ruling earlier this month that deemed IR a distribution licensee, IR will not have to pay any cross-subsidy surcharge to electricity distribution companies if it decides to buy power from third parties.
With the railways spending R13,000 crore on annual purchases of electricity, the surcharge is likely to be in the region of R3,000-4,000 crore.
Meanwhile, the railways had approached Tata Power to terminate one agreement with it so that it could buy cheaper power from Dabhol. Tata Power has agreed to this but has said that this approval was subject to the Aptel judgment — if Aptel turns down the CERC ruling, Tata Power wishes to have the freedom to continue to sell to the railways at the earlier price.
“Railways had power purchase agreements (PPAs) with Tata Power for 100 MW and Maharashtra State Electricity Distribution Company (MSEDCL) for 200 MW and now wants to terminate them to purchase power from Dabhol,” a source explained.
Experts say the CERC ruling is not on very firm ground because it is largely based on the Railways Act. Every time a new Act comes into being, it supersedes earlier Acts unless it specified that it does not. In this case, the Electricity Act was categorical that it would not supersede the Railways Act, and the latter says the railways can do both transmission and electricity distribution.
Earlier this year, the government had also issued a notification saying the railways was a deemed licensee. But since state government distribution companies will lose the money the railways saves, the case is likely to be keenly fought, with the losing party at Aptel certain to approach the Supreme Court.
The agreement with the railways is under the Power Sector Development Fund (PSDF) scheme, floated by the Centre in 2014. The scheme envisages waiver of state-based charges, which will enable a uniform power-purchase cost across states. The railways intends to use Ratnagiri Gas and Power (to give the formal name of the Dabhol project) electricity in Maharashtra, Gujarat, Madhya Pradesh and West Bengal.
The railways will buy power at Rs 4.70 per unit, and the Centre will add an additional Rs 1.45 per unit as subsidy, which means RGPPL will net Rs 6.15 per unit from the sale of power. The amount will be collected directly in an IDBI Bank account, which will then be used to pay fuel, operation and maintenance expenses, and the balance will be retained by lenders for servicing the company’s loans.
In September, RGPPL’s board had approved the de-merger of the company, one for power generation and the other for running a liquefied natural gas (LNG) terminal.
Meanwhile, unable to meet its loan repayment obligations, RGPPL had earlier this year converted Rs 450 crore of its debt into equity, making the State Bank of India-led consortium of lenders the majority stakeholder in the company with a 35.48% stake. GAIL and NTPC individually own 25.5% of the company.
Power struggle:
*WBSEDCL appealed against CERC ruling giving Indian Railways deemed licensee status under Electricity Act
*After the ruling, railways will not have to pay cross-subsidy surcharge to electricity distribution companies
*Railways has PPAs with Tata Power for 100 MW and MSEDCL for 200 MW
*Railways had sought to end one agreement with Tata Power and MSEDCL to buy cheaper Dabhol power
*Railways will buy power at Rs 4.70 per unit; Centre will add additional Rs 1.45 per unit as subsidy
*Earlier this year, RGPPL converted Rs 450 crore of debt into equity, making lenders majority stakeholder with 35.48%
