CERC DECISION TO PROMPT MORE CONTRACT RENEGOTIATIONS? - Participated in the Discussion on CNBC TV

On the face of it is a decision supported by commercial rationale. Simply put Adani Power asked for tariff revisions in its contracts to supply power to Gujarat and Haryana power utilities based on an increase in the cost of coal due to a change in law in Indonesia -- the source of its coal supply. the CERC denied that the change in Indonesian law amounted to force majeure but granted frustration of contract on grounds that 'if the price escalation is on account of some event which was beyond the contemplation of the parties, then the impact of price variation needs to be duly considered and addressed in order to enable the parties to continue to perform their obligations under the contract.'

It went on to say Adani Power 'needs to be compensated for the intervening period with a compensation package over and above the tariff discovered through the competitive bidding. The compensation package to be called 'compensatory tariff' could be variable in nature commensurate with the hardship that the petitioner is suffering on account of the unforeseen events.'

So a committee will now be set up to decide on the increase in tariff. As the CERC says this maybe a 'pragmatic way to make the PPAs workable while ensuring supply of power to the consumers at competitive rates'.

But in doing so the CERC may have opened the floodgates to contract renegotiation in any and all such instances involving the government? Menaka Doshi discusses that with Gopal Jain, Supreme Court Advocate, Dipesh Dipu, Partner at Energy Consulting Firm Jenessi and Adani's Lawyer Vikram Nankani of ELP

Video on Youtube - http://www.youtube.com/watch?v=RYiq8LknjY8