The country's largest private power producer also said that tariff for the 4,000 MW Mundra project, which would go up to Rs 2.90 per unit still remains very competitive.
Mundra ultra mega power project is estimated to be incurring a loss of Rs 1,500 crore annually mainly on account of rise in Indonesian coal prices.
Describing the CERC order as partial relief, Tata Power Managing Director Anil Sardana told PTI that it would help in reducing annual losses by as much as Rs 400 crore to Rs 1,100 crore.
Electricity generated from Mundra plant is supplied to Gujarat, Maharashtra, Rajasthan, Haryana and Punjab. The power purchase agreement with distribution companies (discoms) from these states is for selling electricity at a price of Rs 2.26 per unit.
Taking into consideration the fluctuations in exchange rate, the tariff of electricity from the plant is now around Rs 2.45 per unit.
The Central Electricity Regulatory Commission (CERC) has allowed a compensatory tariff of Rs 0.524 per unit for the project from the period beyond April 1, 2013. According to Sardana, the hike in electricity tariff would be in the range of 45-47 paise per unit. The final tariff would be around Rs 2.90.
The estimate of "45-47" paise hike in tariff is after taking into account various other factors including those related to Return on Equity (RoE), according to the company.
Even after the tariff hike, the cost of power sourced from Mundra plant would be "very very competitive" compared to electricity sourced by beneficiaries from other sources, he noted.
At present, he said the cost of electricity decided through competitive bidding in long-term power purchase agreements is above Rs 4 per unit.
"It (CERC ruling) is actually a great win for customers an asset has been salvaged," he added.
CERC has allowed compensation of Rs 329.45 crore for the period from April 1, 2012, to March 31, 2013, besides compensatory tariff of Rs 0.524 per unit for period beyond April 1, 2013.
The order is aimed at compensating the losses suffered by the Mundra plant, located in Gujarat, due to rise in the price of Indonesian coal that is used to fire it. Tata Power had approached the regulator seeking relief.