Published On : Sun, Jul 27th, 2014

Manoj Jayaswal demands Rs 1,837 crore from MADC as termination payment

Manoj-JaiswalNagpur News.

The Abhijeet Group has demanded a termination payment of Rs 1,837 crore as per article 5 of Concession Agreement (CA) from MADC. He claimed this in a press meet held on July 27, 2014.In case Maharashtra Airport Development Company Limited (MADC) agrees to the suggestion of MERC and agrees to refer the matter to MERC, the tariff determination can take place. “There is precedence in this case that of Butibori Power Plant of Vidarbha Industries which was also a captive power plant (CCP) and later changed to independent power producer (IPP) and the tariff was approved by MERC at about Rs 4 per unit,” said Manoj Jayaswal, Chairman of Abhijeet Group while addressing a press conference on July 27, 2014.

He added that every year they are suffering losses to the tune of Rs 250 crore.
In case of Abhijeet MADC Nagpur Energy Limited (AMNEPL), power plant with coal from WCL sources, its tariff too would be about the same which is half that of MSEDCL for industrial consumers. He claimed that this will benefit all the consumers of the SEZ.

He said that a dispute between a distribution licensee and a generating company could be resolved by the regulator i.e. MERC as per the provisions of Electricity Act 2003. It’s more than two years since the hearing is pending with MERC. But MADC has not approached MERC again to get the matter resolved. “This clearly shows intention of State Government not to operate the power plant,” he claimed.

Jayaswal said that AMNEPL has terminated the CA with MADC for the 246 MW TPP with effect from July 26, 2014. The agreement was signed on November 7, 2007.
“The decision to terminate the contract was forced on us because of several defaults and violations of contract terms and conditions by MADC and also its attitude of non co-operation on several minor and major issues. Here we are listing some of these,” he alleged.

Under the terms of the CA, it was MADC obligation to provide required land and all consents and clearances. AMNEPL was to arrange finance and construct the power plant. MADC was to give 62.5 hectares of land for the main power plant, required land for the Railway siding and land for ash dike. However, MADC gave only about 42 hectares land and failed to give the balance land for railway siding and as disposal. To complete the project in time AMNEPL was forced to purchase the required land at its own cost. It even advanced money to MADC to procure the land. AMNEPL also obtained the permission to construct the Railway siding but MADC did not give the required land.

The power plant site though initially outside the MIHAN SEZ was to be included by MADC within the SEZ. But MADC failed even in this. AMNEPL completed the project and commissioned the 246 MW (4×61.5MW) by August 2011. But the dedicated transmission line between the power plant and the SEZ was delayed as MADC failed to fulfill its obligation to obtain the authority to lay the transmission line and obtain the Right of Way for the foundations of the transmission towers. “This had to be done by AMNEPL. The line was completed in April 2012. However, the power supply to the SEZ could not be commenced again due to MADC,” he stated.
“The power plant was constructed as a CPP. As per the Electricity Act, 2003 and Electricity Rules 2005, only those holding 26 per cent equity in the generating company are entitled to get power supply from a CPP. Thus only MADC holding 26 per cent equity in the company alone could take power from the CPP for its own consumption. For supply of power to the units in Mihan, MADC was required to obtain a ‘Distribution License’ and to get the ‘Tariff’ approved by the MERC.

MADC applied to MERC for declaring it as a ‘deemed distribution licensee’ as the ‘developer’ of the SEZ as per the notification dated 3rd march, 2010 issued by Government of India under the SEZ Act, 2005. During the proceedings in the MERC, MADC declared the power plant as an ‘IPP’. MADC, was conferred the status as a “deemed distribution licensee”. But the MERC termed the CA as ultra virus the Electricity Act. It advised MADC to approach MERC for fixation of tariff. Even though power plant was ready, MADC was not ready to buy electricity, as there was no approved tariff as required under section 63 of the Act and the MERC regulations. MADC approached MERC for adoption of ‘Tariff’ in July 2012. “But MERC dismissed the petition of MADC as not maintainable on various grounds all attributable to MADC. Thus no tariff was approved,” he added.

In view of this and to get approval for tariff, AMNEPL approached the Regulator (MERC). In the mean time power supply was commenced to the consumers in the SEZ on a provisional basis in January, 2013. But MERC again pointed out several major lapses and defaults on the part of MADC (The MERC order dated August 23, 2013 contains these) and MERC declined to adopt (under section 63) or determine the tariff (under section 62).

Throughout this period, three units of the power plant mostly remained idle as MADC refused the  permission to sale the power outside the state despite the fact that there  is a provision in the CA for this and the fact that there was no long term demand within the State. The company incurred huge losses as a result of this denial and was required to go to CDR.
In the absence of the regulatory approval, the power supply from AMNEPL to the consumers was required to be stopped forthwith as per the multi-year tariff (MYT) regulations of MERC. But, AMNEPL though under no obligation, but in order not to allow the consumers to suffer, continued the supply initially from its power plant. In 2013, the demand in MIHAN-SEZ was only 2 MW as against 94 MW projected by MADC. “Since it was technically not possible to run one full unit for this meager demand, we kept our word and deployed diesel generator (DG) sets and supplied electricity to MIHAN units from November 2013 onwards at agreed rate of Rs 3 per unit. We incurred heavy losses in this because our cost of electricity from DG sets was around Rs 20 per unit. In order to give MADC a chance to rectify the deficiencies pointed out by the regulator and its other defaults under the CA, the company gave a ‘Notice of Default’ to MADC followed by another Notice of intent to terminate on October 24, 2013 as per the provisions of the CA. Ninety days time was given to MADC under the notice. This was further extended by another two months. AMNEPL further waited up to July 25, 2014. “Thus MADC had more than 9 months to rectify and cure the defaults. But it completely failed to do so. “Since MADC failed to get the approval of the power tariff, it was not legally possible for us to continue the supply of electricity to MIHAN-SEZ units beyond April 2014. So we were forced to stop electricity supply from April 14, 2014 onwards,” Jayaswal said.

Instead of curing the defaults pointed out, MADC approached MERC to allow
“Throughout this period, we have been trying to sort out the issues with MADC and also at state government level. We offered to procure and supply power at a rate much lower than that of MSEDCL, but MADC did not accept it on very flimsy grounds,” he said.
“We also approached the Chief Minister who is ex-officio Chairman of MADC several times for an appointment to explain the position as well as the way out. We also approached the local MLAs, MPs  and met the Deputy CM, who very kindly heard us but told us that the CM as the Chairman of MADC has to take the final decision in the matter. We have not received any response,” he said. “Having incurred huge losses in the process, anyone would appreciate that we have been forced to terminate the contract by MADC and so it alone is fully responsible for it. We have however kept the doors open for meaningful discussion with MADC / State Government,” Jayaswal said. Also present were A K Shrivastava, Senior Director, Satish Shrikhande, Senior General Manager (Business Development).