Tata Power is moving closer to restarting its imported coal-based Mundra plant in Gujarat after the state approved a supplemental power purchase agreement (SPPA), providing a pathway to revive operations that have been halted for about six months.
“We will sign the PPA with discom in Gujarat soon,” said Praveer Sinha, managing director and CEO of Tata Power, adding that the signing will enable restarting of the plant. The development comes after a prolonged shutdown following the withdrawal of the Centre’s Section 11 directive last year, which had mandated operation of power plants under extraordinary circumstances and provided compensation for higher fuel costs.
Financial Recovery
Sinha said the revised arrangement allows pass-through of actual coal costs, addressing a key constraint that had rendered operations unviable earlier. “There won’t be any losses next year,” he said. The company had incurred losses of nearly Rs 1,000 crore in the first nine months of the current financial year due to the shutdown and expects to recover once generation resumes.
The Gujarat agreement is expected to serve as a template for similar pacts with other procuring states like Maharashtra, Rajasthan, Punjab and Haryana, which together source power from the Mundra plant. “Hopefully next few weeks we will close the agreements with other states,” Sinha told a TV channel. He added that the tariff structure under the Gujarat PPA is broadly aligned with rates earlier allowed under Section 11 and similar to terms agreed in a prior arrangement between the Adani group and the Gujarat government.
Template for States
Analysts said clarity on the fine print will be critical to assess the financial impact.
The restart also coincides with expectations of tighter power supply-demand balance heading into the summer months. Analysts said the Union government could consider reintroducing Section 11-type measures if required, amid concerns over lower availability of gas-based and hydroelectric generation. In such a scenario, coal-based thermal plants are likely to shoulder incremental demand.
Coal continues to account for roughly three-fourths of the country’s electricity generation, even as renewable energy capacity expands and contributes about 22% to the overall mix.
On Friday, Tata Power’s shares touched an intra-day high of Rs 418.40, up 5%, before closing at Rs 402.75, up 1.07% on the BSE.