MUMBAI: Tata Power’s shuttered 4,000-megawatt Mundra thermal power plant in Gujarat could restart soon, likely before the end of March, managing director and chief executive Praveer Sinha said, even as the company has repeatedly missed its own timelines to bring the plant back online.
“Mundra is starting soon, it is just a matter of time,” Sinha told Mint on Friday on the sidelines of a press conference to announce a partnership with Salesforce. A supplementary power purchase agreement (SPPA) with Gujarat and other client states should happen “very quickly,” he said, declining to elaborate further.
The ultra mega power project in the coastal town has been shut since July 2025 amid disagreements with client states—Gujarat, Rajasthan, Maharashtra, Punjab, and Haryana—over the pass through of the high cost of Indonesian coal.
Analysts at brokerage IIFL say a combination of rising power demand ahead of summer and the possibility of higher fuel prices due to the war in West Asia could strengthen Tata Power’s negotiating position this time. Historically, sharp rallies in natural gas prices, such as the one seen currently, have also pushed coal prices higher as fuel substitution plays out in electricity markets, they said.
Asia spot liquefied natural gas prices (LNG) more than doubled compared to last week and reached their highest level in over three years after a production halt by Qatar, which provides 20% of global LNG supply, has triggered a scramble for gas, according to a Reuters report dated 6 March.
The average LNG price for April delivery into north-east Asia was estimated at $22.50 per million British thermal units (mmBtu), the highest level since mid-January 2023 and over double the price of $10.40/mmBtu the previous week, the report said, citing industry experts.
"Sustained rise in coal prices, along with uncertainty around LNG supply and elevated summer power demand, can catalyse a resolution at Mundra,” the IIFL analysts wrote in a report dated 3 March.
Higher global coal prices could benefit Tata Power in two ways, the analysts said. The company would gain directly through its 30% stake in an Indonesian coal mine. Every $20 increase in the per-tonne price of Indonesian coal could add about 10% to Tata Power’s consolidated earnings, the IIFL analysts estimate. The coal typically sells at $70-80 per tonne.
Higher coal prices could also accelerate a resolution for the Mundra plant itself. The shutdown cost the company about ₹1,000 crore in lost profits during the first nine months of FY26, the analysts estimated.
Whether Tata Power manages to lock in a deal for the Mundra plant will have a significant bearing on its share price, which trades at 10x its 12-month forward Ebitda, a discount to its long-term median of 11x. The scrip closed at ₹375.45 on the BSE on Friday, up about 6% since the Mundra plant was shut last July.
In an investor call on 4 February, Sinha had said the company had reached agreement with Gujarat on all the issues of the SPPA except one point. He did not disclose what this point was, but said the company hoped to resolve it in two-three weeks.
“And on a similar basis, we will parallelly start discussing with the other states so that we are in a position to start operation of the plant, maybe by the end of this month,” Sinha said. This was the third resumption guidance given by the company that did not come to pass.
Anatomy of a shutdown
The Mundra power plant has long been an albatross around Tata Power’s neck. The company bid for the ambitious project in 2006 and locked in a tariff of ₹2.26 per unit, betting on cheap Indonesian coal. But just before the plant was commissioned in 2012-13, Indonesia changed its laws, pegging coal exports to international prices instead of cheaper long-term contracts, upending the economics of the project.
Tata Power could not pass through the higher fuel costs to its client states and lost money on every unit of power it sold for nearly a decade. The plant was run at lower capacity levels during this period to limit losses.
In 2022, during a national power crisis, the government invoked Section 11 of the Electricity Act, 2003, forcing all imported coal and gas-based power plants to run at full capacity while allowing fuel costs to be passed through. This made it profitable for Tata Power to run the asset.
The Section 11 order lapsed on 30 June 2025 and Tata Power shut the plant three days later.
The company has since been negotiating with its client states to allow continued pass through of the higher cost of imported coal, but the plant remains idle.