Gujarat opposed to increasing tariff of Mundra UMPP

Gujarat is opposed to increasing the tariff of electricity generated from Tata Power's 4,000-MW Mundra ultra mega power project, whose costs have soared due to expensive Indonesian coal, a top state government official said today.

"They (Tata Power) have to approach to the appropriate forum, the regulatory authority which is Government of India. There is no such provision (of increasing the tariffs) in the power purchase agreement," Gujarat's Principal Secretary (Energy) DJ Pandian told reporters here.

Stating that the state's position on the issue is "very clear", he said, "We had signed the power purchase agreement based on the bids placed by the Government of India and it was a competitive bid. So, we cannot change anything right now."

Tata Power commissioned the first unit (of 800 MW capacity) of the project on March 8. It had won the mega power project in 2007 by quoting the lowest tariff of Rs 2.26 per unit. The Rs 16,000-crore project was to run on imported coal.

However, the Tata group firm has been claiming for last few months that costly Indonesian coal could make the 4,000-MW Mundra project a "non-performing asset", if no decision is taken on increasing tariffs for electricity from the plant.

The issue has arisen as Indonesia adopted a new law in September last year for coal exports and linked the prices with a benchmark, set on the basis of domestic and international indices.     This has led to substantial increase in the purchase cost of coal for Indian companies, including Tata Power.

The company has been pitching for 65-90 paise per unit hike in the tariff for the power produced by Mundra UMPP due to increased fuel costs.

"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 tariffs). We will keep on generating till the time we could," Tata Power's Managing Director Anil Sardana had said in February.

However, Gujarat's Principal Secretary (Energy) said that being the regulator, only the central government can decide on the issue.

"If Government of India agrees for certain changes, we will look into that. I cannot tell you anything right now," Pandian said.

Five states -- Gujarat (1,805 MW), Maharashtra (760 MW), Punjab (475 MW), Haryana (380 MW) and Rajasthan (380 MW)-- will get electricity at the fixed cost from the Mundra UMPP.

For the project, Tata Power has a supply contract for 10.1 million tonne per annum (MTPA) with Indonesian companies KPC and Arutmin, in which it holds 30% stake each.