Tata Power asks govt to hike ‘unviable’ Mundra UMPP tariffs

Tata Power asks govt to hike ‘unviable’ Mundra UMPP tariffs

New Delhi: Petitioning the Power Ministry to consider its proposal for raising tariffs under its 4,000-MW Mundra power project in Gujarat, Tata Power said that if some action is not taken in time, the project may become “unviable".

“Despite all our efforts to complete the project within the targets and costs, circumstances have arisen which could result into the project becoming unviable," Tata Power said in a letter to Power Minister Sushilkumar Shinde.

Coastal Gujarat Power Limited (CGPL), a special purpose vehicle set up by Tata Power to execute the project, is investing around 17,000 crore in the Mundra ultra-mega power project (UMPP). Of this, the equity component is 4,250 crore and the remaining amount is being raised as debt.

The Power Ministry had earlier asked Tata Power - the developer of the Mundra UMPP - to sort out the matter with the procurer, the state of Gujarat, bilaterally.

Tata Power had asked the Power Ministry to allow them to increase the tariffs of its Mundra project as the imported coal sourced from Indonesia for the project has become dearer. A new regulation in Indonesia, to be implemented from 23 September, 2011, makes it mandatory for all the coal companies in the island nation to sell coal at prevailing international prices.

The move is likely to impact the margins of Indian power generation companies that are securing the fuel from Indonesia. Earlier, there were no restrictions on coal pricing in Indonesia.

Tata Power is executing the 4,000-MW (5x800 MW) Mundra project in Gujarat, the first 800-MW unit of which is likely to be commissioned next month.

Power Finance Corporation (PFC), the nodal agency for UMPPs in the country, has so far awarded four such projects. The fifth UMPP at Bedabahal, in Orissa, for which preliminary bids were invited, received a response from 20 companies. PFC will finalise the award of the project to the successful bidder by the end of the current financial year.