State utilities have asked Tata Power to legally contest the Indonesian government's decree that has raised the cost of coal for its Rs 17,000-crore Mundra project, instead of trying to raise the tariff the company had bid to win the project. The utilities' resistance to any increase in charges by Tata Power is supported by the Central Electricity Authority (CEA), which has argued in a recent meeting with utilities and the power producer that increase in input costs is a risk the company should bear. It would be difficult to change the tariff as other companies had lost the race for the ultra mega power project (UMPP) only because they had quoted a higher tariff, an official at a utility said.
"In any competitive bidding process, once a successful developer is selected at a bid price, it would be unfair on the other bidders if higher price is allowed to it at a later stage on any ground," a CEA official is believed to have said in a formal meeting of the project's joint monitoring committee last month, according to official sources. The views of the customers and the CEA have implications for other projects that depend on imported coal, including the Krishnapatnam UMPP of Reliance Power, where construction was halted after the Indonesian government decreed that coal can be exported from the country only at international prices. Tata Power's Mundra project is unviable at its contracted tariff of Rs 2.26 per unit and wants to charge more than Rs 3 per unit to make it viable, industry officials said.
Tata Power bagged the Mundra project in 2007 on the basis of the lowest tariff bid of Rs 2.26 a unit, but a change in the coal pricing policy in Indonesia has impacted the cost structure.According to sources, Tata Power may again approach the Power Ministry to allow the company to raise electricity tariff for the Mundra ultra mega power project.
Tata Power had earlier approached the Power Ministry seeking permission to increase tariff for power produced from the Mundra UMPP, which is based on imported coal.The Mundra project consists of 5 units -- each of 800 MW -- and the power generated would be supplied to Gujarat, Maharashtra, Rajasthan, Haryana and Punjab.
Late last year, the Indonesian government had said the coal from the country would only be exported at international market prices.The move, resulting in high fuel prices, has put a question mark over the viability of many projects including Mundra UMPP that were bagged by developers through tariff-based competitive bidding process.
The Association of Power Producers (APP) -- a grouping of about 22 companies that account for over 95% of private generation capacity -- has also sought the Prime Minister's help to address the issue.Power Finance Corporation (PFC) is the nodal agency for UMPPs and has so far awarded four such projects.The award of the fifth UMPP, coming up at Bedabahal in Orissa, is expected to be finalised soon.
Source - Economic times