High coal prices, weak rupee leading to a crisis in power generation firms

With the cost of imported coal touching a six-year high and rupee weakening against the US dollar, power generation companies are witnessing a crisis of sorts, with Essar group shutting down its 1,200-megawatt (MW) power project and the Adani group utilising only part of its installed capacity in Mundra, Gujarat.

The only hope, company officials say, is from a high-powered committee set up by the Gujarat government with a mandate to find out how much haircut can be taken by stakeholders, including banks, state electricity boards and promoters, to make power projects viable.

It’s a double whammy. Not only has the seaborne thermal coal price hit a high of $110-120 a tonne, the rupee has also weakened to a record low of Rs 69 (currently trading at Rs 68.62) against the US dollar. The cost of imported coal for Indian power generation companies has touched a seven-year high (based on average prices) during the April-June quarter.

“Adani Power is running on couple of phases of its plant wherein it is supplying to Haryana under the power purchase agreement and supplying us only half of the committed power. Only Tata Power has been meeting the required 1,805 MW for Gujarat. We have written to independent power producers (IPPs) to restore their supply and meet their PPA commitments,” according to a top official of the Gujarat Urja Vikas Nigam Ltd.

An Essar spokesperson confirmed that the plant had shut down during the April-June quarter. A Tata Power spokesperson said as of now, four units of its Mundra plant were operating and one unit was under major overhaul. Emailed queries to Adani Power did not elicit any response.

A petition by these power producers to raise electricity prices was shot down by the Supreme Court in April 2017. The three companies had even offered the Gujarat government to take over 51 per cent stake in these plants for Rs 1. But no decision was taken by the government so far.