The incentive that the central power regulator gave Tata Power and Adani Power, might turn out to be short-lived revelry. Five state governments are all set to challenge the move by the regulator to let these companies pass on their increased fuel costs to power purchasers. Maharashtra, Haryana, Punjab and Gujarat have taken an in-principle decision to soon approach the Appellate Tribunal of Electricity (ATE) against the order passed by the Central Electricity Regulatory Commission (CERC) last month with regard to pay a compensation of Rs 329.45 crore for the period from April 1, 2012 to March 31, 2013 to Tata Power's 4,000 MW ultra mega power project (UMPP) at Mundra in Gujarat. Besides, these states along with Rajasthan were also asked to pay a compensatory tariff of Rs. 0.524 per unit from the period beyond April 1, 2013.

These states have sought opinion from their respective lawyers for filing separate petitions before ATE. Maharashtra's share from Mundra project is 760 MW while its 1,805 MW for Gujarat, 475 MW for Punjab and 380 MW for Harayana.

Gujarat and Harayana are also contemplating filing their separate petitions against CERC's order allowing compensation of Rs 830 crore to Adani Power. Adani Power will be entitled for a 'provisional lump sum compensation' in respect of Gujarat power purchase agreement (PPA) for Rs 420.24 crore and in respect of Haryana PPA for Rs 409.51 crore. Gujarat has tied-up for 2,000 MW and Harayana for 1,424 MW from Adani Power's 4620 MW plant at Mundra in Gujarat.

The procurers will pay the amount as determined above in equal monthly instalments over a period not more than 36 months from the date of this order, with carrying cost for delay in payment beyond due date at the surcharge applicable as per the PPA. These parameters shall be used for calculation of compensatory tariff on monthly basis, with effect from April 1 2013 till the hardship on account of Indonesian Regulation persists," the order said.

An official, who has been involved in the long drawn legal and regulatory battle, told Business Standard, ''States are approaching ATE on a major issue of sanctity of the power purchase agreement signed by them for a period of 25 years. Even though PPA has not been opened the CERC has come out with a concept of compensatory tariff to provide relief to Tata Power. CERC's order will provide Tata Power but the financial condition of utilities will further deteriorate.''

The official however, declined to divulge further details as he added that the discussions are underway.