Tata Powerís 4,000 MW Mundra ultra mega power project (UMPP) in Gujarat, which reported a loss of Rs 548.54 crore in the first quarter of the fiscal, could soon get some relief with the Deepak Parekh committee understood to have recommended the project be given gross compensatory tariff of around 56-58 paise per kWh. The tariff will be adjusted for profits that Tata Power earns from its coal mines in Indonesia.
The Parekh committee was tasked with coming up with a formula for the pass-through of additional costs arising from the sharp rise in the prices of imported Indonesian coal. Should its suggestion be accepted, the effective effective tariff payable by discoms to Coastal Gujarat Power (CGPL) ó the entity that runs the Mundra UMPP ó would be around Rs 3.02 per kWh.
The current tariff including capacity charges, fuel energy, ocean freight and inland handling charges is Rs 2.44 per kWh. The plant supplies power to Maharashtra, Gujarat, Rajasthan, Punjab and Haryana.
Analysts estimate that every 10 paise per unit increase in tariff brings down Tata Powerís losses by approximately Rs 250 crore. The power producerís consolidated profit in the previous fiscal was Rs 990.3 crore, which means a net compensation of 50 paise could mean a substantial increase in profits. The Mundra UMPPís under-recoveries of fuel costs were around R0.50/ kWh on a generation of 6,148 million units in Q1 FY14.
The panel also favours a ceiling on the compensatory tariff of anywhere between R0.61 per kWh and Rs 0.87 per kWh in FY14. The stakeholders, it says, can discuss the third-party sale of power beyond the normative availability of 80% which is prohibited at present under the power purchase agreement(PPA). While bidding for the UMPP,Tata power had quoted a levelised tariff of Rs 2.265/ kWh with a scalable component of 45%; the plant runs entirely on imported fuel.
In July last year, Tata Power had asked the Central Electricity Regulatory Commission (CERC) for a pass-through mechanism to offset the adverse impact of the escalation of imported coal prices and changes in the Indonesian law for pricing of coal. CGPL had projected an annual loss of Rs 1,873 crore on account of these two factors.
Although the CERC didnít permit renegotiation of tariff, the regulator ordered in mid-April this year a compensatory package to balance the interest of the consumers and the suppliers, for a limited period till the hardship persists. Should Tata