After selling its Scunthorpe steel unit in U.K. for one pound last year, the Tata Group’s power unit, Tata Power, has now offered to sell a majority 51% stake in its debt-laden 4,000 megawatt (MW) Mundra Ultra Mega Power Project (UMPP) for just ₹1.
Mundra UMPP, operated by Tata Power subsidiary Coastal Gujarat Power Limited (CGPL), has run up accumulated losses of ₹6,457 crore against a paid-up equity of ₹6,083 crore.
Offer to consumers
CGPL CEO Krishna Kumar Sharma has approached the Centre and the distribution companies of five States including the Gujarat Urja Vikas Nigam Ltd. offering to part with 51% stake for just ₹1, provided the discoms agree to buy all the power generated at higher rates.
The five States that have inked a power purchase agreement (PPA) with Tata Power’s Mundra plant include Rajasthan, Haryana, Punjab, Madhya Pradesh and Gujarat.
CGPL with its 49% stake plans to operate the project as a contractor and provide all necessary support to the plant.
The Mundra unit has an outstanding loan of more than ₹10,000 crore and the lenders have stopped further disbursal to the plant citing non-viability of the project, which accounts for 2% of India's power needs.
‘Beyond control’
“It is unfortunate that due to circumstances beyond the control of the company, the Mundra plant has been reeling in losses year-on-year,” Tata Power said in a statement. “CGPL would continue to work towards exploring all options to stop losses and best contain the onslaught of under-recovery on the fuel side. Any decision with regards to the plant will be made keeping in mind the best interests of all stakeholders.”
Ousted Tata Sons chairman Cyrus Mistry had raised the Mundra UMPP issue, citing wrong business decisions taken when Ratan Tata was at the helm of the group as the main reason for the utility’s losses.
The Tatas had, in February 2006, won the Mundra UMPP bid at a price of ₹2.26 per unit, based on imported Indonesian coal. However, in 2010, the Indonesian government said that any export of coal could be done only at prices linked to international rates. Tata’s plea for higher power tariffs was also rejected by the Supreme Court.
Tata Power had posted a loss of ₹593 crore in the March quarter.
