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Tata Power seeks to raise tariffs for its Mundra power plant units

Tata Power company has applied for some regulatory approvals for higher tariffs for its loss making Ultra Mega power project Mundra, after the Central Electricity Regulatory Commission (CERC) let Adani Power’s power plant in Mundra to raise its tariff to negate the extra expense of the imported coal cost to power consumers.

While Tata Power can expect a favourable outcome since its plea for higher tariff is also based on the same issue of escalation in coal prices, the company has to get on board all the 5 state power distribution companies it sells power to, unlike Adani, who had to get just 1. Only when it has a consensus with the customers, can it file a petition with the regulator.

On 12 April, CERC approved higher tariff for 2 GW of power that Adani Power sells to Gujarat Urja Vikas Nigam Ltd. Adani Power’s Mundra plant, just like Tata Power’s Coastal Gujarat power plant in Gujarat with a capacity of 4.15 GW which can cater to 2% of the nation’s total power needs, runs on imported coal.

Both units were hit after Indonesia introduced a presidential decree in 2011, stating that coal prices would be declared on a month-to-month basis, linked to market factors and no licensee would be able to sell coal at lower than that licensed price, resulting in losses for the Mundra Power units as they could not pass on the cost to their customers.

Tata power is currently incurring a loss of Rs 1,500 Crore on its Mundra Power Plant, Which it hopes to reduce by half upon tariff revision by increasing the tariff to Rs 3.10/unit from the contractual tariff of Rs 2.80/unit.

The Gujarat Discom has approved the proposal, and the company now needs approval from the other 4 discoms of Maharashtra, Haryana, Rajasthan and Punjab. The CERC order highlighted the need to look at contribution by each stakeholder for mitigating hardships faced by these projects.

It is known fact that Mundra would offer lower cost power, in spite of the increase in tariff, than any alternate source of power. Talks with the states are in process but due to election, Chief Ministers and Ministers are campaigning. A positive response is expected after the elections

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