In a relief to Adani Group and Tata Power, the Supreme Court (SC) on Monday allowed state distribution companies (Discoms) and power producers to move Central Electricity Regulatory Commission (CERC) to amend the power purchase agreement (PPA) as per the recommendations of the high-powered committee (HPC). In an exclusive interview to CNBC-TV18, Praveer Sinha, managing director and CEO of Tata Power, said high-powered panel's recommendations are fair and just for all stakeholders. However, Mundra plant will continue to repeat losses despite the recommendations, he said.

Watch: High-powered panel's recommendations are fair and just for all stakeholders, says Tata Power

Edited Excerpts:

For the moment, can you just interpret how we should understand yesterday’s Supreme Court directive?

We have not got the copy of the order but what we have heard from the court and from the others who were there is that the SC has said that the power purchase agreement (PPA) can be amended and it can go to the competent authority, in this case, CERC, for approval. That is what we understand. Once the details of the order come, we will be able to share more details with you.

Should we understand that largely what the high-powered committee (HPC) said in terms of the cost of coal and how it should be worked into? How much cut each of the stakeholders need to take, largely will that be the shape of things to come?

Absolutely right, that is how it looks like. There is a fair and equitable sharing of pain by all the stakeholders. So the utilities or the buyers of power will be allowing the pass-through of coal. The lenders will be taking a 20 paisa cut and the sharing of profit will happen by the project developers of the coal mines.

In addition to this, there are two very big upsides, which have been given. One is that the developers have to supply 90 percent of the power and not 80 percent, which is the present cap and that means additional quantity of power will come to the utilities and DISCOMs, which will be at a very notional cost virtually at these variable costs.

Second is that the option of extending the PPAs from 25-35 years again since the project would be fully paid for and fully depreciated, they will get a longer period of supply of power at a very notional cost. So I think in all, it is a very fair sharing of responsibility than sharing of benefits.

What is the current under-recovery that you are sitting on and some analysts suggest that there could be an EPS impact of around Rs 3-4, do you think that is a reasonable assumption?

I would not be able to comment on that but right now, at $100 we have a negative under-recovery of about 90 paise and with the 20 paise and the profit sharing, I think it is about 50-50, that is the type of number that we are looking at.

In that 90 paise, the lenders take 20 paise, how much do the consumers take, 40 paise, is it?

Yes, it would be around that but this adequately gets compensated when they take the additional quantity from 80 to 90.

I agree with you, I am just wondering there can always be consumer groups, if you also take that additional 10 percent of power that you will supply, will the consumer pay about 20-25 paise more, what is the likely number?

The likely number that we have seen in most of the states is about 2-3 paise.

It looks like unlikely, there would be consumer groups protesting against such a small change.

Yes and that was the reason that most of these state governments and the beneficiaries when they discuss, they made it in such a way that the impact on the consumer remains very minimal.

So in terms of a timeline, when should we expect all of these legalities to end, are we looking at 7-8 weeks or could it take some more time?

I think the SC has given an outer limit of eight weeks and I feel that within that period, all these things should get resolved.

How would the current quarter look like? If it is eight weeks, where are we? This quarter will perhaps not get the benefit?

As per the HPC report, it is effective from October 15. So it is a question of accounting that will have to be done but I think it is little premature, let it go through the whole process of going through the state governments and also the CERC and then only, we will be able to see.

I agree that the abundant caution on your part. Not to count the chickens before they hatch but assuming that it goes through, do we see all red getting wiped out in Q3 itself and you would be reporting a number in the black?

I don’t think - as I mentioned to you that even with the 50 percent under-recovery being taken care of, we would still be in the red. So it is not that, the only thing is the red amount will come down. So that is all will happen. It is not that it will absolutely disappear.

Can you tell us a bit more about your deleveraging plans because your debt equity ratio has reduced now to 2.27 times in this quarter versus about 3 times the same period last year? Over the next 12-18 months, what would be the plan?

We are looking at around a similar number. So that because there would be some investments in our renewable projects and other businesses that we would be doing but generally it will be in the same range.

Why do you say that even after this resolution, you would continue to be in the red, what is the next big thing that you can do to come back into the black?

We will have to keep on improving on the efficiency of the plant and other factors which we are already doing. We are already doing a lot of blending of coal. So from 10 percent low CV coal, we have gone to about 30 percent. So, we will do internally a lot of initiatives to take care of this requirement. But based on whatever has been projected in the HPC report, it only partly offsets the losses on the under-recovery. It does not fully recovers.

Separately there were reports after the rupee started depreciating that there is a problem for solar companies, would you have any issue because of rupee depreciation on your renewable segments?

We do 100 percent hedging for all the purchases that we make from outside. So, we are fully hedged for all our exposures in the foreign exchange.

You maybe hedged on exposures but even in the quarter gone by, the solar manufacturing business, the revenues were down 60 percent. I understand, there was a sales deferral because of the safeguard duty, do you expect more pressure in the second half?

In the second half, we expect some of the initiatives that we had taken in this year to show results. So we do not expect any pressure. We will see better results and also in our solar manufacturing, because of the safeguard duty, many of the orders could not be executed. Now there is clarity on that issue, those will get executed in the next two quarters. So I expect a fairly good returns on some of these assets.