To salvage its debt-laden Mundra power project, pushed to a corner after the Supreme Court in April ruled out compensatory tariff of 40 paise per unit, Tata Power has offered a 51% stake in the project for a nominal Rs1 to Gujarat’s state-run power utility GUVNL. This is subject to the rider that it agrees to pay full fuel cost during the remainder of the 25-year power purchase agreement (PPA). The agreement was signed in 2007.
The additional 40 paise variable tariff will ensure there is no loss on account of fuel costs. The plant’s existing capacity charge of 90 paise per unit — right now, the variable charge is 140 paise — is enough to take care of servicing the debt.
While it was not immediately known if GUVNL would accept the offer, Tata Power said: “If the procurers take over 51% equity on a back-to-back basis they would have the advantage of competitive power for full life of the plant, that is 40 years, and can have unrestricted generation even beyond 80% availability at a very competitive price.”
Electricity from the plant under the formula would still be one of the cheapest available to the SEB, the company claimed, attributing the solution to the bankers. GUVNL buys 48% of the power from Tata’s Mundra plant.
In the letter, copies of which were marked to Nripendra Misra, principal secretary to the prime minister, and the Union power secretary, the Mundra unit’s CEO Krishna Kumar Sharma said the 4,000 MW plant has accumulated losses of Rs6,457 crore against a paid-up equity of Rs6,083 crore.
Besides, it has outstanding loan of Rs 10,159 crore and lenders have stopped further disbursal due to non-viability of the project, Sharma wrote.
Power minister Piyush Goyal said on Thursday that while it was up to the procurers (SEBs) to take a call on the Tata proposal, “the central government is willing to play the role of a facilitator to bring all the stakeholders on the table so that an informed, considered view can be taken”.
“We are also conscious of the issues and we will ultimately have to protect the interest of consumer so that the power tariffs through indirect route don’t increase for common man or discoms,” he said.
Tata Power was awarded the project in February 2006 after it quoted a price of Rs 2.26 for every unit of electricity generated. The imported-coal-based plant was intended to be run on the company’s own coal mines in Indonesia. In 2010, however, the Indonesian government said that any export of coal could be done only at prices linked to international rates. The Tatas, in turn, sought higher tariffs for power; the CERC first allowed it in 2013 on the PPA term of “Change in Law” and the Deepak Parekh committee computed the compensatory tariffs for the company as also Adani Power, which faced a similar problem for its Mundra unit.
However, the appellate electricity authority Aptel in 2016 ruled that “Change in Law” can’t be invoked but asked the regulator to compute the relief under force majeure. This was in fact much more generous to the firms.
In April 2017, disposing of the appeal filed by discoms from Rajasthan, Maharashtra and Punjab, the Supreme Court rejected the companies’ claims for compensatory tariffs, even as it broadened the scope of “Change in Law” in the context of domestic policies.