Tata Power’s 4,000-MW ultra mega project at Mundra, in Gujarat, is staring at an annual loss of Rs 500 crore in the very first year of commissioning due to the high cost of coal to be sourced from Indonesia.
The Tatas will be deprived of the cost advantage on coal imports from the South-East Asian country due to a new local law that requires benchmarking of coal sales to an index-based price linked to global rates.
This will necessitate Tata revisiting its cost calculations on the Mundra UMPP. UMPPs were seen as a means to achieve leapfrogging of investment and capacity addition in the power sector. Out of the four ongoing UMPPs projects in the country, the Mundra project was slated to be the first to come onstream.
“It (the impact) will depend upon what is the prevailing price of coal. Suppose at current price of $120 per tonne, we will have huge losses in the variable side and which could mean that we will have a first-year loss of Rs 500 crore,” Tata Power Managing Director Mr Anil Sardana told PTI in an interview.
At current prices, the Indonesian coal that will be used to run the Mumdra UMPP would increase power generation costs by 60 to 65 paise per unit, he said, adding that the company has sought a meeting with the buyer states at the end of this month to find a solution.
Today, the rate is Rs 2.26 per unit and if “you add that 60-65 paise, it becomes Rs 2.90 per unit”, Mr Sardana said. “We don’t know what answers will be palatable to the beneficiaries (the buyer states) side... They have to find out the answers they are willing to take, which can range from compensation to allocating a coal mine in India till the time we locate a new mine abroad and develop it,” he added.
Tata Power had won the bid for developing the Mundra UMPP in 2007 by quoting the lowest tariff of Rs 2.26 per unit and the Rs 16,000 crore project was to run on imported coal.
It has a supply contract for 10.1 million tonnes per annum (MTPA) of coal with Indonesian coal companies KPC and Arutmin, in which it holds 30 per cent stake each. Part of this coal was to be used for the Mundra UMPP.