Tata Power’s ultra mega power plant in Mundra will stop supplying power to five states from March 11 onwards, said Praveer Sinha, CEO and managing director of the company. “We will gradually start shutting units if a resolution is not reached with states,” said Sinha.
The decision was taken after buyer states did not agree to a tariff hike for the power coming from the UMPP. Mundra supplies power to Gujarat, Haryana, Rajasthan, Punjab and Maharashtra.
The Gujarat-based UMPP has been in the middle of a regulatory tussle for the past seven years over the pass through of escalated cost of imported coal.
In an April 2017 judgement, the Supreme Court denied compensation to Tata Power for increased coal cost, and directed the Central Electricity Regulatory Commission (CERC) to formulate any possible relief for Mundra under the power purchase agreement between Tata Power and procuring states.
The Gujarat government formed a committee which formulated a revised tariff and haircut for the company and the lenders to help the project stay afloat. The committee decided to increase the rate of power from Mundra. However, no other state has agreed to the hike.
Sinha, in a prior conversation with the paper, had said that his company was in discussions with the states to accept the recommendations of the committee. With no state agreeing to increased tariff, the company has now decided to snap power supply.
Losses faced by Mundra have continued to impact the finances of Tata Power. In 2018-19, loss from Mundra unit was to the tune of Rs 1,700 crore.
Owing to lower income, Tata Power reported consolidated profit before tax (PBT) at Rs 349.08 crore during third quarter FY20, 23 per cent lower from Rs 456.27 crore reported in the year-ago period. Losses at its Mundra power plant, the company said, were lower for the quarter.
The firm’s consolidated profit after tax was 12 per cent higher at Rs 246 crore, from Rs 220 crore a year ago. “This is mainly due to lower losses in Mundra and better operational performance across all businesses,” the company said on Wednesday. The Mundra power plant, the company said, saw lower fuel under-recovery in the December quarter.