Cash-strapped power corporation gets Rs 2,800 crore shocker from SC
In a major jolt to the already cash-strapped Punjab State Power Corporation Limited (PSPCL), the Supreme Court has directed it to pay Rs 2,800 crore to Larsen & Toubro (L&T) to compensate it for the cost of coal washing and transportation. Private firm L&T runs Nabha Power Limited (NPL), Rajpura, and Talwandi Sabo Power Plant under a power purchase agreement it had signed with the power corporation.
The judgement was passed on August 7 by the bench of justice Rohinton Fali Nariman and justice Surya Kant while taking up a contempt petition filed by the L&T against the Punjab government and PSPCL chairman-cum-managing director (CMD).
The overall impact of the judgment will be Rs 12,000 crore in next 21 years, the remaining time period of PSPCL’s power purchase agreement with Larsen & Toubro.
In case the PSPCL management decides to make up for the financial burden due to the judgment, it will have to hike the power tariff by 10 paise per unit with immediate effect. The power corporation is reeling under Rs 30,000 crore debt and is facing acute cash crunch as it is not getting the free power subsidy bill from the government.
“It’s really a jolt for us as we have to pay arrears of about Rs 1,200 crore to Nabha Power Plant, Rajpura, and about Rs 1,600 crore to Talwandi Sabo Power Plant in next two months. Further, the judgment will put Rs 275-crore annual burden for Talwandi Sabo and Rs 225 crore for Rajpura thermal plants, which will make the power costlier,” said a senior PSPCL functionary, admitting that the PSPCL is not in a position to pay such a huge amount.
“The apex court decision will lead to higher power generation cost and tariff thereof. This has also undone all the austerity measures to bring down the tariff as Rs 2,800 crore burden will have a cascading effect. It’s almost 10 per cent of the total revenue of PSPCL,” said an official.
“The PSPCL is paying price for the inefficiency of IAS officers who couldn’t vet the PPAs properly. And, it will cost the consumers dear,” said an official. It was a pre-bid question asked by a company, but Punjab bureaucrats and the then PSPCL management didn’t clarify on it and remained silent.
The overall impact will be Rs 12,000 crore for the entire duration of the power purchase agreement with the L&T.
PSPCL CMD Baldev Singh Sran said that he will first have to study the Supreme Court order and consult the legal team, to make a comment.
The issue pertains to washing charges and measuring calorific value of coal at the mine while loading. The PSPCL had rejected the L&T claim to get coal washing charges, saying that as per the PPA and ministry of environment norms, the L&T has to use only washed coal for power generation in Punjab. The L&T contested the PSPCL claim in the Supreme Court saying the PPA mentions using only washed coal, but the washing charges, which comes around Rs 500 crore annually for both thermal plants, have to borne by the power distributor. The power regulator and Appellate Tribunal For Electricity had passed orders in favour of the PSPCL, but the apex court overturned it.
As the PSPCL didn’t implement the earlier judgment in toto, L&T filed a contempt petition, in which apex court again reiterated that the point of measuring the calorific value of coal for power plants would be at the project site. And the cost of washing coal could be added to the tariff.