No decision on rates could make Mundra project an NPA: Tata Power

Amid costly Indonesian coal raising a question over the viability of many power projects, Tata Power has said the flagship 4,000-MW Mundra ultra mega power project (UMPP) could become a "non-performing asset" if no decision is taken on increasing rates for electricity from the plant.

Tata Power bagged the Mundra project in 2007 on the basis of the lowest rate bid of Rs 2.26 a unit, but a change in the coal pricing policy in Indonesia has disturbed the cost structure of this project and others dependent on imported coal.

"It (Mundra UMPP) is not a non-performing asset to the extent net worth is there. One day, it could become if no decision is taken (on rates)," Tata Power managing director Anil Sardana said.

"We will keep on generating (power from Mundra UMPP) till the time we could. When we have no shareholder money left out, nobody will give us coal," he noted.

The electricity from the Mundra UMPP, to be fired with Indonesian coal, would benefit five states, including Gujarat, Maharashtra, Punjab and Haryana. The first unit of 800-MW has been synchronised.

Tata Power is in discussions with states concerned and the Centre, over revising the rate structure. "We are not asking for any change in the fixed cost, which is the cost on account of plant," Sardana said. "We are only saying that whatever we get as a fuel, we toll and convert it into power. We are not asking for any charges for tolling. Change the variable cost for today, as well as future, so that plus and minuses are all yours," he said.

Despite doing everything right, these problems have come up, he added. "If the country feels that they don't want to own the project, then perhaps it is a different feeling altogether. We have told the beneficiaries that if you can't pay this tariff, you say that you don't need this power. Then we will sell it to somebody else," Sardana said.

The Indonesian government's new law requires benchmarking of coal sales to an index-based price linked to global rates. This move has pushed prices of the dry fuel very high.

"A 90 paise of fixed cost for Mundra is the lowest for any project like this. In this amalgamated cost of Mundra, if the (offtakers) agree to differential price, the total difference in tariff is just two per cent. After revision, the power cost will be Rs 3.05 or Rs 3.10 (per unit)," Sardana pointed out.