MUMBAI, Mar 21: Tata Power has officially announced in a statement that the Gujarat state government has approved a power supply agreement (PPA) with the company to restart its 4-gigawatt (GW) Mundra plant, operated by Tata Power’s subsidiary, Coastal Gujarat Power.
“The Gujarat cabinet has approved the Supplementary PPA, and a government order has been issued. After regulatory clearances, the company and Gujarat Urja Vikas Nigam Limited (GUVNL) will sign the agreement,” Tata Power announced in an official statement.
According to the terms of the PPA, Tata Power will resume long-term power supply to Gujarat from its plant.
Tata Power’s Mundra plant will soon be run at full capacity and it expects to recoup losses which is estimated to be around Rs 1,000 crore.
It has also been announced that Tata Power will sign similar PPAs with other procuring states like Maharashtra, Rajasthan, Punjab and Haryana as well as close these deals in the next few weeks.
In February, Tata Power stated that it has concluded its discussions with the Gujarat government to reach an agreement regarding the Mundra plant. “We will probably start discussing with the other states so that we are in a position to start the operation of the plant, maybe by the end of this month (February),” Tata Power CEO & MD Praveer Sinha had stated during a post earnings conference call for the December quarter.
The updated PPA allows cost pass-through for coal, which was a concern after the power ministry had withdrawn emergency compensation due to high fuel cost.
The Mundra plant ran on imported low-sulphur coal and it had to be shut down last year, after the power ministry withdrew emergency compensation for high fuel costs under Section 11.
Tata Power primarily used imported coal from Indonesia at the Mundra plant, but issues surfaced when Tata Power began incurring additional costs, after Indonesia levied duties on coal exports.
The company passed on the additional costs to its customers, but the state governments of Gujarat, Rajasthan, Maharashtra, Haryana, and Punjab opposed it since power purchase agreements (PPAs) signed earlier did not allow pass-through of increases in the cost of imported coal.
The government of Gujarat and Tata Power had been in talks for nearly four years to resolve several issues and the latest development will lead to resumption of operations of the Mundra plant after eights months.
The Mundra plant in Gujarat is crucial for Tata Power because it accounts for one-fourth of Tata Power’s total electricity generation capacity of 16 gigawatts. The company supplies electricity from the plant to Rajasthan, Maharashtra, Haryana and Punjab. (UNI)
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