A file photo coal mine workers

A file photo coal mine workers

Tata Power has entered into long-term supply contracts

Tata Power has entered into long-term supply contracts

Tata Power has entered into long-term supply contracts for sourcing 10.1 million tonnes per annum (MTPA) coal with Indonesian companies KPC and Arutmin, in which it holds 30% stake each. Part of this coal was to be used for the Mundra UMPP.

A file photo coal mine workers

He added, “Why only me, no developer can take this burden on himself when it fluctuates so much. There has to be a mechanism (to pass on the increase on account of variable costs) and a long-term solution to the issue."

According to the original contract, in the first five years, Mundra was to get 75% of the coal at index-linked prices and the rest was to be supplied at a discounted rate of about $40 per tonne. After that, the entire quantity was to be purchased at market prices.

Sardana said even if “you add that 60-65 paise (to 2.26 per unit tariff of Mundra), it becomes 2.90 per unit", although it is up to the buyer states to find out the solution.

Claiming that the company came to know about the new Indonesian law in September this year, Sardana said the company has written to the power ministry to evolve a mechanism in which cost escalation is allowed as a pass-through in tariff after consulting all beneficiary states.

“We had completely de-risked ourselves. Now impossibility of that (coal not being available at discounted rates) has happened by the change of law there in Indonesia. It is none of our mistake, we did everything that was required," he added.

In 2006-2007, when UMPPs were first awarded, they were seen as a means to raise investments and push capacity addition in the power sector. Of the lot of four UMPPs, Mundra was the first to get commissioned.

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