Tata Power's Mundra UMPP to snap power supply to five states on March 11

Decision comes after buyer states say no to tariff hike; UMPP has been in the middle of a tussle for seven years over passthrough of escalated cost of imported coal

Tata Power’s ultra-mega power plant in Mundra will stop supplying power to five states from March 11, said Praveer Sinha, CEO and managing director of the firm. “We will gradually start shutting units if no resolution is reached with the states,” said Sinha.

The extreme step is being taken in the wake of buyer states not agreeing to a tariff hike for the power being supplied by the ultra-mega power project (UMPP). Mundra supplies power to Gujarat, Haryana, Rajasthan, Punjab, and Maharashtra.

The UMPP, based in Gujarat, has been in the midst of regulatory tussles over the escalated cost of imported coal for seven years now. In a judgment in April 2017, the Supreme Court denied any compensation to Tata Power for the increased coal cost. It also directed the Central Electricity Regulatory Commission (CERC) to formulate relief for Mundra under the power purchase agreement between Tata Power and the power procuring states.

The Gujarat government formed a committee which formulated a revised tariff and haircut for the company and its lenders to help the project stay afloat. The committee decided to increase the rate of power supplied from Mundra. However, no other state has agreed to the same.
 

Sinha, in a prior conversation with the paper had said that they were in discussion with the states to accept the recommendations of the committee. With no state agreeing to an increased tariff, the company has now decided to snap the power supply.

Losses faced by Mundra have continued to impact the finances of Tata Power. In 2018-19, loss from its Mundra unit was to the tune of Rs 1,700 crore. 

Owing to lower income, Tata Power reported a consolidated profit before tax of Rs 349.08 crore during Q3FY20, 23 per cent lower from Rs 456.27 crore reported in the year-ago period. Losses at its Mundra power plant, the company said, were lower for the quarter. 

The firm’s consolidated profit after tax was 12 per cent higher, at Rs 246 crore, from Rs 220 crore a year ago. “This is mainly because of lower losses in Mundra and better operational performance across all businesses,” the company said on Wednesday. 

The Mundra power plant, the company said, saw lower fuel under-recovery in the December quarter.