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Home News Power Sector News Won't mediate Tata Power, RPower UMPP tariff hike: Power Ministry

Won't mediate Tata Power, RPower UMPP tariff hike: Power Ministry

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GeneratorTata Power and Reliance Power are clamouring for a revision in the tariffs of their ultra mega power projects based on imported coal, but the Power Ministry has decided to steer clear of the matter, directing the generation companies to sort out the issue bilaterally with procurers. Tata Power and Reliance Power are developing 4,000-MW ultra-mega power projects at Mundra (Gujarat) and Krishnapatnam (Andhra Pradesh), respectively.

The two firms had asked the Power Ministry to allow them to increase the tariffs of their projects as the imported coal sourced from Indonesia for these projects has become dearer.

A new regulation implemented by the Indonesian government has made it mandatory for all overseas sales of coal to be benchmarked to prevailing international market rates. The move may put the margins of Indian power generation companies that are securing the fuel from the island nation under pressure. Previously, there were no restrictions imposed by the Indonesian government on coal pricing.

Following the development, Tata Power and Reliance Power had written to the Power Ministry for raising the tariffs of their ultra-mega power projects. If the price of coal rises, it would increase the input cost for the power project and investors may not find it feasible to put money into such projects.

In tariff-based projects, a rise in fuel cost is not passed on to the tariff.
But a company will be adversely impacted when there is an abrupt spike in global prices.

"The recent changes introduced by the Indonesian government in respect of the coal prices are well beyond any developer's reasonable expectations," Coastal Gujarat Power, the special purpose vehicle of Tata Power for the Mundra project, said in a letter to power minister Sushilkumar Shinde, adding that a tariff revision of Re 1 a unit will be required for the project to become viable.

Tata Power said, "The new Indonesian coal policy will lead to a sharp escalation of coal prices to as high as 150 per cent, which could result in the project becoming unviable." The company has asked the power ministry to "intervene through an open dialogue with the Indonesian government and expeditiously resolve the coal price issue".

The firm has tied up 3.28 million tonnes of coal from Indonesia at a discount. But the new norms have increased prices by $40 a tonne, upsetting the fuel costs worked out by the company at the time of the bidding.

RPower officials said the move by Indonesia was threatening the feasibility of import-based thermal power projects in the country. As Krishnapatnam is yet to take off, the officials said they would wait till the issue was resolved. RPower bagged Krishnapatnam in Andhra Pradesh by committing to supply power at Rs 2.33 per unit, while Tata Power got the Mundra project by quoting Rs 2.26 per unit.

"We have nothing to do in the matter (hike in tariffs of the Mundra and Krishnapatnam UMPPs) and also PFC has no say in the matter as the projects were awarded to the firms and the power purchase agreements were signed with the beneficiaries," a Power Ministry official told PTI.

On being asked whether the Power Ministry would play the role of a mediator in the matter, the official said, "No... We have no say in it."

Krishnapatnam is one of three UMPPs being executed by Reliance Power. The others are Sasan (Madhya Pradesh) and Tilaiya (Jharkhand).

Tata Power is executing the 4,000-MW (5x800 MW) Mundra project in Gujarat, the first 800-MW unit of which is likely to be commissioned next month.

Power Finance Corporation (PFC), the nodal agency for UMPPs in the country, has so far awarded four such projects.

The fifth UMPP at Bedabahal, in Orissa, for which preliminary bids were invited, received a response from 20 companies. PFC would finalise the award of the project to the successful bidder by the end of the current financial year (2011-12).


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