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• Mundra ultra power porject have instead asked the buyers to approach a higher competent authority, including the power ministry, to examine the possibility.Tata Power Co. Ltd’s customers for electricity generated by the 4,000 megawatts (MW) Mundra ultra mega power project (UMPP) in Gujarat have refused to consider any move to allow a higher tariff because of the rise in fuel prices.They have instead asked Tata Power to approach a higher competent authority, including the power ministry, to examine the possibility.At a joint monitoring committee meeting on Coastal Gujarat Power Ltd (CGPL), as the UMPP is known, held in the first week of February, states such as Gujarat (which will buy 1,900MW), Maharashtra (800MW), Punjab (500MW) and Rajasthan (400MW) conveyed their view to the utility’s executives.

• This may affect the financial viability of the project as fuel costs have escalated. Tata Power, which has been lobbying the Union power ministry for a higher tariff, acquired a 30% stake in two coal mining units and a trading company from Indonesia’s PT Bumi Resources Tbk for $1.1 billion (around Rs. 5,480 crore today) in 2007 to source fuel for the Mundra plant. But Indonesia has stipulated that starting 23 September, the coal that the country produces will be pegged to prevailing international prices.

• “All states have refused to review the power purchase agreement (PPA) at the joint monitoring committee meet held on 6 February,” said D.J. Pandian, principal secretary (energy and petrochemicals), Gujarat government, who co-chaired the meeting. “A PPA is a long-term contractual agreement and we as a state are not the competent authority to make any changes in it. If Tata Power has any issues regarding tariff or if they want to revisit the PPA, they can approach the regulatory authority.”

• While officials from Haryana (which is to buy 400MW) were not present at the meeting, they separately informed the committee later that they, too, were not in a position to revise the PPA, said another official who attended the meeting, on condition of anonymity.UMPPs follow a competitive tariff-based bidding process in which a special purpose vehicle (SPV) is set up to reduce risk perceptions and increase investor confidence. The SPV takes care of regulatory requirements such as land acquisition and environmental clearances, and transfers these to the winning bidder.The Union government has already distanced itself from the issue and a top Central Electricity Regulatory Commission (CERC) official, requesting anonymity, said that Tata Power hasn’t approached India’s apex power sector regulator.

• “The issue has to be resolved by the Centre and all the stakeholders have to be taken into confidence,” said Saurabh Patel, Gujarat’s energy minister.According to officials who attended the meeting, while the main focus of the meeting was not on the fuel or the tariff issue, they came up for discussion when Tata executives raised concerns over soaring coal prices and how the company’s equity would get eroded if some solution wasn’t arrived at soon. It requested the committee members to consider the option of revising tariff rates.A Tata Power spokesperson denied that the company made any such suggestion.

• “This information is not correct. During the meeting the company briefed the procurers on the various developments, including commissioning, and also gave them facts as requested by the procurers,” Tata Power said in an email response. “Neither there was any specific proposal put up nor any such stand taken by the states. The procurers did ask about the details of the mining business which the company shared with procurers.”Mint reported on 5 September that the Gujarat government had refused to consider any move to allow a higher tariff. The states are to buy power at Rs. 2.26 per unit, according to the PPAs that have been signed.

• “The issue of the rise in cost of imported coal is not just related specifically to only Mundra but all imported coal-based projects which exist and which would need to be developed from herein after,” the Tata Power spokesperson said. “It is important to add that CERC had predicted a 3.46% increase in coal cost per annum, as a trend, which has been more than 130% against what would have been 17% as per CERC guidelines for the intervening period under reference.”

• The company said: “It is important to add that Tata Power had contracted coal from Indonesia on terms which were the mirror of the CGPL tariff for coal. However, since the Indonesian government has changed the export norms for coal from their country, Tata Power can’t get imported coal based on contracted terms. All the senior leaders from the sector have made a representation to the PMO (Prime Minister’s Office) to resolve this issue.”The Association of Power Producers lobby group has told the power ministry that “due to unprecedented price volatility seen in the international coal market in recent times, a 25-30-year contractual arrangement on fixed, levelized tariffs is unworkable”. It has asked for the fuel cost to be passed through to end consumers.

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