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Electricity Tribunal allows PowerGrid to execute M.P. project at higher cost — Sets aside CERC order on `cost ceiling'

Our Bureau

The Tribunal ruled that the dual role of PGCIL — as a commercial undertaking and its statutory role as Central Transmission Utility — required to be treated as two separate responsibilities.

New Delhi , Jan. 11

THE Appellate Tribunal for Electricity has overturned an earlier ruling of the Central Electricity Regulatory Commission (CERC) which had directed Power Grid Corporation of India Ltd (PGCIL) to execute a transmission link at a `cost ceiling' suggested by the utility, which formed the basis for the rejection of a proposal by a private consortium that was to originally execute the project.

The Appellate Tribunal's order effectively allows PGCIL to execute the project at a revised cost, higher than the "ceiling" submitted by the transmission utility to the CERC earlier.

The project dates back to early 2003, when PGCIL identified the Bina-Nagda-Dehgam (Madhya Pradesh) transmission lines — associated with NTPC's Sipat power plant — for implementation through the private participation route.

A consortium of Tenega Nasional Berhad, Malaysia and Kalpataru Power Transmission Ltd was the sole party that made a techno-commercial and tariff proposal, with the combine quoting a final cost of Rs 798 crore.

PGCIL, in its capacity as Central Transmission Utility (CTU), advised the CERC that the combine's bid was "escalated" and stated a "ceiling" of Rs 617 crore, following which the Commission rejected the licence plea of the private consortium. Following this, the CERC directed PGCIL to execute the project at its stated "ceiling cost" of Rs 617 crore.

PGCIL subsequently appealed to the CERC seeking a higher cost estimate of Rs 686 crore, citing inflation and increased input costs as reasons for the cost escalation. The CERC, in its order in June 2005, turned down the PGCIL plea for a higher cost approval.

Dual role: On a fresh appeal by PGCIL, the Appellate Tribunal has now allowed the company to execute the project at a higher cost of Rs 686 crore. In its order, the two-member Bench upheld PGCIL's argument that its recommendations to CERC on the validity of the Kalpataru combine's bid amount was made in its capacity as the CTU, while the construction was to be done by PGCIL on a commercial basis and that the estimated cost cannot be binding on it.

The Tribunal ruled that the dual role of PGCIL — as a commercial undertaking and its statutory role as CTU — required to be treated as two separate responsibilities.

The Tribunal held that it was unfair to "entrap" PGCIL to its earlier recommendations.

The Tribunal has also termed as unsustainable, the CERC's view that PGCIL's advice amounted to blocking private sector investment, that it applied pressure tactics and that its conduct was unjust.

Related Stories:
PowerGrid may enter generation through management contracts
`CERC taking steps to harmonise power distribution'

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