Price rise ... A shot in the hand!

In the previous article I mentioned that the Price rise is a shot in the arm and now I also want to justify that it is a shot in the hand.
Even while I was contemplating to file a PIL against this price rise, Haryana Govt. whose electricity distribution companies would be affected by this price rise has already challenged the verdict.
Just to brief the context again .. the Central Electricity Regulatory Commission, the authority to regulate the price of electricity, has allowed for a pass through of the additional cost of coal in the existing price of electricity. This is considered to a big shot in the arm and hence all the power generation companies' stocks also soared. (Click here for my previous article on this!)
If we look at it in detail, there is more to it than just a good news.
When Adani bid for the project, though the company had an option, they bid for a fixed tariff that is independent of the fuel prices (Incidentally all the others who lost the bid had opted for a flexible pricing option which is dependent on the price of the fuels!). Because of this fixed tariff, Adani was able to quote less and win the bid. So, the terms and conditions are set that Adani will not allow for any change in the price, for whatever be the change in the input fuel costs. Even in the terms & conditions of the contract, there was no clause which allowed for a price hike basis an exception input fuel cost increase.
Under these circumstances, why should the regulatory commission allow for a price hike. And moreover the name given fort his price hike is "Compensatory tariff". This changes the whole meaning of a competitive bidding mechanism.
Here on-wards I will always bid low, because I know there is going to be a compensatory tariff later which can be influenced. Hence, it can no longer be called a competitive bidding. It is an indirect way of co-ercing the regulatory or ensuring mis-management of funds for the benefit of the private parties. In simple terms it is bribe. I, as a power developer will approach the decision makers in the regulatory commission seeking compensatory tariff and in turn will compensate them in kind or through other means that cannot be tracked.
Incidentally, the regulatory commission gave the verdict one month before the chairman is about to retire. The case was pending for more than 2 years and in a sudden rush of events the verdict is given.
Haryana Govt. has for once immediately shot off a petition seeking cancellation of this order, which may stall this utter disregard to legal and regulatory norms.


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