Decided on October 27,2006



- (1.) THIS application has been made for review of order dated 9.5.2006, passed by the Commission in Petition No. 153/2004, determining the tariff in respect of Farakka Super Thermal Power Station (hereinafter "the generating station), for the period 1.4.2004 to 31.3.2009.
(2.) The petitioner has contended that there are certain fundamental errors in the said order dated 9.5.2006 and accordingly has sought review. According to the petitioner, the order needs to be reviewed on account of the following errors present therein: (a) Not considering, First-In-First-Out (FIFO) method of loan repayment, (b) Impact of de-capitalisation of assets on cumulative repayment of loan, (c) De-capitalisation of liabilities-Impact adjustment for prior period, (d) Admissibility of depreciation up to 90% where depreciation not recovered due to non-achievement of target availability, (e) Reimbursement of publication expenditure, and (f) Life of the generating station. First-In-First-Out (FIFO) method of repayment. The petitioner has stated that it borrows money on the basis of consolidated corporate balance sheet which enables it to finalize loan on favourable terms. According to the petitioner, borrowing at the corporate level instead of at the specific project level enables it to reduce the cost of borrowing. In the absence of any specific stipulation to the contrary attached to a particular borrowing, the petitioner adopts FIFO for repayment of loans. This is particularly beneficial as the first drawls are generally at higher rate of interest and later drawls are at lower rate of interest in the current interest rate regime. The petitioner also has the flexibility of re-negotiating loans on reduced rate of interest for subsequent drawal with the same lender.
(3.) ACCORDING to the petitioner, it has been adopting FIFO method to allocate interest liability to its generating stations. The Commission has, however, not considered FIFO method of repayment and has followed the average method of repayment of loan, irrespective of the terms and conditions of the loan agreements. ACCORDING to the petitioner, adoption of FIFO method of loan repayment would be more beneficial to the respondent beneficiaries of the generating station. The petitioner has accordingly sought review.;

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