Hopeful of agreement on Mundra power plant before June-end: Tata Power CEO

Tata Power's Mundra facility had stopped its operations after hike in the price of its imported coal, which made the power purchase agreements (PPAs) it had with five states unviable (representative image)

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Tata Power expects a long-term resolution to the issues surrounding procurement of power from its Mundra Ultra Mega Power Project (UMPP) by June this year, the company's CEO Praveer Sinha told Moneycontrol in an exclusive interview.

"Since the power tariff in this plant is very competitive and it is mostly on the top of the merit order, we are expecting that some arrangement will be agreed based on mutual discussion with the same states. At present, under Section 11, full quantum of the power from Mundra is being procured by the procurers. We are hopeful of a decision on this before the end of the June, which means before Section 11 is lifted," Sinha said.

The Mundra facility in Gujarat had stopped its operations after hike in the price of its imported coal, which made the power purchase agreements (PPAs) it had with five states unviable. The company has been in talks with these states to revise them and agree on supplementary PPAs.

However, since February, 2023, the plant has been running after a mandate by the Indian government under Section 11 of the Electricity Act, 2003 to meet the country's soaring power demand. In October, the government extended the emergency clause of the Electricity Act mandating all imported coal-based power plants to run on their full capacity till June 30 this year.

The mandate turned out to be favourable for Tata Power because the Central Electricity Regulatory Commission (CERC) in April, 2023 had clarified that Tata Power can supply power from its Mundra ultra mega power plant (UMPP) at full cost pass through as per Section 11 of the Electricity Act, 2003. While the CERC fixed the tariffs, Tata Power expects these rates to be benchmarked for the supplementary PPAs being discussed with the five states, which include Gujarat, Rajasthan, Punjab, Maharashtra and Haryana.

In Q3 FY24, the Mundra power plant suffered losses despite getting a pass through of its costs as approved by the CERC under Section 11.

When asked about the reasons for the same, Sinha said, "The loss in Mundra plant is basically because of the accounting requirements where in as Ind AS 115 kicks in, you need to consider it for the purpose of loss booking, so, that is the reason. And then of course, there is depreciation which is very high. But, the Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is positive."