Tata Power Company that is awaiting a compensatory tariff nod from four procurer states - Punjab, Haryana, Rajasthan and Maharashtra - for the Mundra UMPP, said the Punjab discom has agreed to the tariff plan recommended by the high level committee, and the matter is now awaiting state cabinet approval.
Praveer Sinha, CEO and MD of Tata Power, told FE that after the approval from the Punjab cabinet, it is hoped that Rajasthan government will follow suit, while Haryana and Maharashtra might wait for the state assembly elections to get over before they decide on the tariffs.
A senior Punjab discom official said, "Purchasing power from any other source would be costly compared to what we are sourcing from Mundra. So, we have agreed to the recommendations on certain conditions, and have sent our plan to the cabinet for approval," the official said.
Sources had told FE earlier the Gujarat discom (GUVNL) agreed to amend exisiting PPAs with Tata Power Mundra units. The development came after regulator CERC, on April 12, allowed tariff hike for Adani Power's 2,000 MW capacity that supplies power to GUVNL, the state discom. While the Adani plant has made separate contractual arrangements with various discoms, the Tata Mundra PPAs were signed under the composite ultra mega power projects (UMPP), which warrants the consent of all beneficiaries to go ahead with tariff revision.
The Supreme Court allowed the CERC (Central Electricity Regulatory Commission) to amend the PPAs of the imported-coal based power plants as per the recommendations of a high-power committee (HPC) constituted by the Gujarat government in 2018. The HPC had recommended reduction in fixed charge by Rs. 0.20/unit, which would necessitate banks to reduce debts by Rs. 4,240 crore for Tata, Rs. 3,821 crore for Adani and Rs. 2,324 crore for Essar Power.
The high-powered committee in October 2018 proposed tariff relief for power plants that were based on imported coal. It recommended lenders to write off a part of their loan to the projects to lower the fixed component in the tariff by Rs. 0.20/kWh and reduce the debt to a sustainable level. The proposal further specified project owners to absorb accumulated losses of a combined Rs. 23,800 crore incurred till September 2018 and discount any profits from coal mining in Indonesia in tariffs. It further recommended companies to recover the increase in cost of coal at a maximum of $110/tonne of monthly average.
Mundra ultra mega power project in Gujarat, had an under recovery of Rs. 0.55/kWh in Q1FY20 that led to a net loss of Rs. 247 crore for the CGPL and an accumulated loss of Rs. 8,500 crore in the seven years of the plant's operation. The plant load factor (PLF) for Mundra in Q1FY20 however was higher by 120 basis points at 77% on account of higher blending of domestic coal and lower coal prices.
CGPL had an outstanding debt of Rs. 8,703 crore as of March 31, 2019 which was lower compared to Rs. 10,324 crore a year ago.
Analyts believe the company will continue to have an under recovery of around Rs. 0.35/kWh even after the compensatory tariff is granted, as lenders will have to write off Rs. 0.20/kwh, while the company will have to take Rs. 0.15/kWh as a subsidy on account of profit from Indonesian coal mines.