Tata Power one step closer to tariff revision at Mundra power plant

The company has been seeking a higher tariff for the power supplied to make up for losses due to higher coal import costs.
The Maharashtra State Electricity Distribution Company (MSEDCL) has received the go-ahead from the state government to revise tariffs for Tata Power’s Mundra unit, according to people in the know. 

Maharashtra is one of the five states that procure power from Tata Power’s Mundra ultra mega power plant in Gujarat. The company has been seeking a higher tariff for the power supplied to make up for losses due to higher coal import costs. 

In March, Tata Power and the states procuring power from the Mundra unit met and agreed to arrive at an acceptable solution on tariffs. Following this meeting, according to people in the know, the Maharashtra government this week decided to give the go-ahead to MSEDCL to re-work the power purchase agreement (PPA).

MSEDCL officials were not available for a comment. A spokesperson for Tata Power said: “We are waiting to hear formally from the government.”

In October 2018, the Supreme Court directed the Central Electricity Regulatory Commission (CERC) to review PPAs signed by states for power procured from Tata Power, Essar Power, and Adani Power’s Gujarat-based plants. These plants were financially hit due to higher coal import costs and lower profits. A high-powered committee (HPC) had earlier recommended entering into a supplemental PPA for higher tariff. 

Adani Power’s Mundra unit, which supplies power to Gujarat and Haryana, also faced similar concerns. However, the company received the required approvals for a revised tariff in April last year. 

Praveer Sinha, chief executive officer and managing director (MD) of Tata Power, had earlier in 2018 said he expected the new resolution to help halve Mundra’s losses. Coastal Gujarat Power, the subsidiary which houses Mundra unit, reported a consolidated loss of Rs 891 crore in the 2019-20 financial year. The plant’s revenue per unit in FY20 was at Rs 2.9.  The unit’s losses narrowed in FY20, lower from Rs 1,654 crore in FY19. 

Tata Power supplies power to five states — Maharashtra, Gujarat, Rajasthan, Punjab and Haryana — from the 4,000-megawatt (Mw) plant. Of these, Gujarat and now Maharashtra have agreed to re-work the purchase agreement. 

Of the 4,000 Mw, Maharashtra sources 760 Mw power from the unit. All states need to agree to rework the current PPA, after which Tata Power and the states will seek regulatory approval for the revised PPA. 

In March, Tata Power sent a notice (to stop power supply) to these states. However, the company continued to supply power to states owing to the Covid-19 hit and the lockdown, where the states’ preference was to use cheaper sources of power.

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