Consumers must brace for power tariff hike to make up for PSPCL’s ₹1,420 cr coal washing charges

Electricity consumers are set to bear an additional burden of ₹1,420 crore as Punjab State Power Corporation Limited (PSPCL) has approached the power regulator to jack up tariff to recover the said amount, which the corporation has paid to private thermal plants as coal washing charges.

Following the Supreme Court orders, PSPCL has paid ₹ 421 crore to Larsen & Toubro-run Nabha Power Limited, and ₹1,002 crore to Vedantta Group that runs the Talwandi Sabo Power Plant. These are coal washing charges from year 2012-13 up to October 2019.

The judgment 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). In the judgment, PSPCL was directed to pay the coal washing charges to private thermal plants, which PSPCL was saying that it was not part of Power Purchase Agreement.

The judgment will put a burden of ₹12,000 crore on the PSPCL over the next 21 years, the remaining time period of power corporation’s power purchase agreement with Larsen & Toubro.

“This will jack up tariff by at least 10 to 12 paise per unit. Our pockets are empty as we paid ₹1,420 crore, as per the apex court decision. We have request the power regulator to announce mid-term review and increase the tariff, otherwise we will go out of cash,” said a senior official of PSPCL, requesting not to be named.

The power corporation is already reeling under ₹30,000-crore debt and is facing acute cash crunch as it is not getting the free power subsidy bill from the government.

“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 that whether they will get coal washing charges, but Punjab bureaucrats and the then PSPCL management didn’t clarify on it and remained silent. And on this lacuna, they got the benefit of ₹1,420 crore instantly, while ₹12,000 crore will be paid in next 21 years.

PSPCL CMD Baldev Singh Sran said, “We have followed the apex court orders and approached the power regulator to increase tariff as PSPCL can’t bear the expenses on its own.”

What is the matter

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 ₹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.

L&T Filed another contempt

As the PSPCL has made a cut into the coal washing charges bills supplied by it, the L&T has filed a fresh contempt petition in the court to get the enhanced payments. L&T is also demanding interest on delayed payment,