Staring at electricity crisis, Gujarat to buy from Tata Power's Mundra UMPP

Will make short-term purchase at Rs 4.5/unit; is the second state to buy from Tata Power Mundra, after Punjab which is purchasing at Rs 5.5 per unit for a fortnight

Reeling under coal shortage and a looming electricity crisis, Gujarat has decided to purchase power from imported coal-based Mundra ultra mega power plant (UMPP) of Tata Power. The state government will purchase power at Rs 4.5 per unit for four weeks.

This is the second state to agree to buy from Tata Power Mundra, after Punjab which has agreed to purchase at Rs 5.5 per unit for a fortnight.  

The Union Ministry of Power recently allowed imported coal-based units to sell power commercially. Tata Mundra is currently not selling to any state due to lack of clarity on the tariff.

The Mundra UMPP of 4 Gw capacity has power purchase agreements (PPAs) with Gujarat, Rajasthan, Maharashtra, Punjab and Haryana to sell power at Rs 2.26 per unit

The unit has been in constant tussle with these five states over the compensation amount due to inflated imported coal prices.

But now, with the shortage of domestic coal, Gujarat is facing a energy crunch of 12.4 million units (MU) against a daily demand of 211 MU (as on October 12). Punjab, on the other hand, has a deficit of 15 MU against a demand of 180 MU.

In 2010, following an order by the Indonesian government increasing its coal benchmark price, the landing cost of coal in India increased. Adani and Tata, which were importing from Indonesia, asked the Central Electricity Regulatory Commission (CERC) to grant them “compensatory tariff” for increased fuel cost. This would have been passed through on the final power rates.

Since then, the two companies have been in legal and regulatory tussle with its buyer states to allow the escalated tariff. After several rounds of bout at CERC, the Supreme Court and APTEL, Gujarat last year decided to revise the terms of PPA with the imported coal units in the state including the two Mundra ones.

However, in July 2020, it did a sharp u-turn and said the earlier government resolution allowing these developers to charge higher tariff, “now stands cancelled”. It said it will now sign supplemental PPAs with these units on a “case to case basis” over and above the existing PPAs.

The two developers have been in talks with Gujarat and the other four procurers to agree to the revised tariff under supplemental PPA.

Sources say Gujarat, with its high energy deficit, is also currently one of highest buyers in the spot market, where the prices have touched a record high of Rs 20 per unit.