The Mundra UMPP (ultra mega power project) of Tata Power will still incur a loss of up to Rs.1,100 crore annually as compared to earlier loss of Rs.1,800 crore, despite the compensatory tariff hike granted by the Central Electricity Regulatory Commission (CERC).
Once implemented the CERC’s order of 52 paise hike per kWh, the company’s financial burden, caused due to abnormal hike in imported coal prices, will reduce. But, it will continue to bear the fuel liability cost in the range of Rs.130-600 crore annually. In addition, it will be ‘sacrificing’ another Rs.500 crore annually, the company said.
“As of now, Costal Gujarat Power Ltd (CGPL) — Mundra UMPP — is required to continue procuring coal at the rates announced by the Indonesian government and supply power without adjustments in the tariff. As a result, the company is facing an annual financial burden of about Rs.1,800 crore, rendering the project unviable. In addition, the steep depreciation of the rupee has considerably affected the capital cost,” Tata Power Managing Director Anil Sardana told The Hindu .
“The CERC order provides a partial relief to the Mundra UMPP,” Mr Sardana added.
“Since inception, the Mundra UMPP has been delivering to the full potential to five beneficiary States albeit with tremendous fiscal pain, and this challenge of keeping the Mundra UMPP viable has continued far too long. CGPL will continue to honour its commitment towards the nation’s energy security by providing reliable and competitive power supply and hope for quicker resolution of the issues before the company finds it difficult to meet the resource requirement,” he said. The project has come up at a cost of Rs.18,000 crore, and the continued losses could jeopardize the operations of Tata Power,. Even after the CERC’s order, many procurers are said to be objecting to it or putting riders, stating that the power purchase agreement signed between them and Tata Power at Rs.2.26 per kWh was sacrosanct and must not be altered. They are likely to challenge the order. However, the company said the order was balanced. “This is a big win for the customers,” he said.
Mr. Sardana said the order would resolve a major impasse affecting imported coal-based power projects.
Recently, Tata Power divested stake from its Indonesian coal mine to raise $500 million, and the proceeds would be utilised to meet its current challenges, he said.
