Post the power regulator’s order allowing compensatory tariff for Tata Power’s Mundra UMPP, the new tariff could work out to be Rs 2.90 to Rs 3.10 a unit as against the existing tariff of Rs 2.34 for Gujarat utilities.
According to a person privy to the development, Tata Power will seek an increase of 60 paise to 85 paise per unit as the compensatory tariff. The Central Electricity Regulatory Commission (CERC) in its April 15, 2013 order had allowed a compensatory tariff for the company. “The company will seek the new tariff in the range of Rs 2.90 to Rs 3.10 a unit inclusive of compensatory tariff. This tariff is crucial to make the Mundra UMPP a viable project,” said the person who did not want to be quoted.
Tata Power wants that the price be made effective from the day-one of the commencement of generation at the plant, which will help company overcome its past financial losses due to difference in realization and costs.
Tata Power spokesperson declined to comment on the matter. However, the Gujarat government is still undecided about formation of a committee, which was directed by CERC in its order. “The decision on formation of the committee is to be taken at the top levels in the government. So far, nothing has been finalized,” said an official at the energy department in the Gujarat government.
Coastal Gujarat Power Ltd (CGPL) – an arm of Tata Power had signed the power purchase agreement (PPA) with five states to supply power at Rs 2.2 a unit. Later, with changes in the Indonesian coal pricing policy that increased fuel cost for the company, Tata Power had sought a revision in tariff. The high cost of fuel had led the company to heavy losses of Rs 1,873 crore annually.
Analysts maintained that the new tariff, if allowed by the regulator, will make the standalone project become viable, thereby bringing major relief for the company on the performance front as well as on the financial side.
“If the company is allowed the tariff hike as it desires to get, it will rectify the situation for the company and will bring the return on equity (ROE) of the Mundra project at reasonable levels,” said Sanjeev Zarbade, analyst with Kotak Securities.
Industry insiders maintained that even if Tata Power adopts a hike of in the range of Rs 0.60 to Rs 0.85 per unit, it will still have one of the lowest in the power tariffs among other thermal power generators in the country.
Also, it will be much lower than the average purchase price of the five states, to which it sells power. The average price of five states works out to be around Rs 3.30 per unit, while the current market rate for providing replacement power his even higher at Rs 4.10 to 4.50 per unit.
At Mundra UMPP currently generates 3800 Mw of power and 47% (or 1800 Mw) of the total generation is supplied to Gujarat at the tariff of Rs 2.34 per unit. The plant, which operates at the plant load factor (PLF) of around 80%, requires coal of around 12-13 million tonnes per annum.
