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IL&FS Tamil Nadu Power Company Ltd. (ITPCL), an imported coal-based power plant that supplies power to Tamil Nadu Generation and Distribution Corporation (Tangedco), has raised concerns over the benchmark rate fixed by the Union Ministry of Power.
ITPCL has a long-term power purchase agreement with Tangedco for a contracted capacity of 540 MW.
Initially, in May 2022, the Union Ministry of Power directed Imported Coal Based (ICB) Power Plants to operate and generate at their full capacity amid an increase in power demand and a mismatch in demand and supply of domestic coal. It was issued under Section 11 of the Electricity Act, 2003.
As per Section 11 of the Electricity Act, the government may, in extraordinary circumstances, ask a generating company to operate and maintain any station in accordance with its directions.
Since the power purchase agreements of the plants do not have adequate provisions for passing through the increase in international coal prices, the Power Ministry constituted a committee to determine the energy charge rate.
The Ministry of Power issued the benchmark energy rates for selected imported coal-based plants, including ITPCL, every fortnight from May 2022 onwards.
The directives have been extended from time to time, and the latest extension is until October 31, 2023.
ITPCL said there has been continuous under-recovery of costs since May 2022, when the Section 11 directions were initially given by the Ministry of Power, and the energy charge rate notified is much less than the actual cost incurred.
The most recent notification of July 28 provides for an energy charge rate of ₹3.64 per unit, which is less than the energy charge of ₹3.85 per unit as per the power purchase agreement executed with Tangedco, while the actual energy cost is estimated to be around ₹5.25 per unit, the company said.
ITPCL has also pointed out that, as per Section 11 directions, payments have to be made on a weekly basis to the supplier; however, Tangedco has been making payments only after 75 days of the date of the invoice as per the Late Payment Surcharge Rules, 2022.
It has also pointed to issues in selling the power in exchanges, as per the directions under Section 11.
ITPCL said it is facing a severe cash crunch and will not be able to sustain operations and continue supply of power under Section 11 at the benchmark rates when actual costs cannot be recovered.
ITPCL has written to the Southern Regional Power Committee to deliberate on the issues.
