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By Matthias Williams and Nidhi Verma
NEW DELHI, April 4 (Reuters) - India's Haryana state will
challenge this week's ruling by the federal power regulator to
allow Adani Power to raise tariffs for electricity in
two states to compensate for the rising costs of coal imports
forced by domestic shortages.
The Central Electricity Regulatory Commission (CERC) on
Tuesday allowed Adani Power to charge more for electricity from
its Mundra plant to existing clients in the states of Gujarat
and Haryana until conditions improve.
The regulator said the tariff was fair given the damage to
the sector caused by the rising cost of imported coal from
Indonesia coupled with the shortage of domestic supplies from
state-run Coal India Ltd.
The decision was welcomed by Indian power companies, but
also immediately raised fears of legal disputes that could
ultimately hurt, rather than help, the sector's recovery.
"Yes," said Haryana state Power Minister Ajay Yadav on
Thursday when asked whether the government was planning legal
"Because we have signed an agreement with them (Adani). We
will make the payment as per the rate at which we have signed
the agreement," he told Reuters by phone.
Asked whether Gujarat would also challenge the order, state
energy secretary D.J. Pandian told Reuters: "All options are
A spokeswoman for Adani Power declined to comment.
Adani's shares rose by nearly 15 percent on Wednesday after
the regulator's announcement. Adani called it a "landmark" order
that would restore investor confidence in the power sector.
Tata Power Company Ltd, which has a similar case
still pending with the regulator that could be heard within
days, said the order would revive several under-utilised or
abandoned project proposals.
But even before the Haryana minister spoke to Reuters, some
were concerned the ruling would bog energy contracts down in the
"Our initial checks suggest a hardline stance by
stakeholders which, if not softened, may result in a protracted
legal case, the outcome of which, at this stage, is difficult to
gauge," Deutsche Bank said in a note.
India desperately wants to add more power capacity to plug
electricity shortages that sap the competitiveness of its
businesses and hobble Asia's third-largest economy, where growth
has slowed to its worst pace in ten years.
But authorities have struggled to balance a need for the
private players in the infrastructure sector to make a profit,
while protecting the ordinary consumer in a country with
hundreds of millions of poor people.
"If we favour a tariff hike, we will be criticised for
favouring Adani Group. In case we don't, the power sector
troubles will mount, and hit potential investments," an official
in the Gujarat government said, speaking on condition of
anonymity. "We will have to tread very carefully," he said.
A prominent anti-corruption activist is currently on a
hunger strike in New Delhi in protest against rising power
Moves to raise electricity prices are perceived as hurting
the country's poor and the issue could prove a sensitive one for
Indian politicians, especially as national elections are due
within a year.
(Editing by Tony Munroe and Sonya Hepinstall)