Private utility Tata Power said that it has decided to discontinue supplies to three Rajasthan state-owned distribution companies from its Mundra ultra mega project (UMPP) due to non-compliance with payment security related issues.

“Coastal Gujarat Power (CGPL), a wholly owned subsidiary of Tata Power, has invoked its rights under the power purchase agreement (PPA) and has decided to discontinue the supply of power to the three Rajasthan state-owned distribution companies from its Mundra UMPP due to non-compliance on payment security related issues,” the company said in a statement.

The move follows its several notices to the discoms as required under the PPA, thus, effectively terminating its contract, it said, adding that the three discoms account for 10 per cent of the total capacity from Mundra UMPP.

“Due to consistent failure on the part of Rajasthan discoms as procurers to fulfil the obligations including collateral arrangements in spite of repeated and regular reminders, CGPL was constrained to issue notice to the state discoms,” the statement said. Rajasthan discoms have large outstanding dues.

“Mundra balance of payments on account of fuel tariffs is already a challenge as recovery through tariff is lower than spending. With continued non-payment in a timely manner and non-availability of payment security, the company finds it difficult to manage payment for its various obligations including buying fuel,” the statement said.

The company will make alternative arrangements for contracting and selling the power, it added.

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