Tata Power reaches agreement with states, won’t shut Mundra UMPP

New Delhi: Tata Power has reached a resolution on compensation with states buying electricity from the Mundra Ultra Mega Power Plant (UMPP) – a major breakthrough that ends the decade-long deadlock that threatened to shut down the imported coal fired 4,000-mw plant.

Some states had refused to alter the original tariff, which was unviable, but later agreed to accept a penalty and let their share of electricity be sold elsewhere.

The agreement was arrived with the intervention of Union power ministry at a meeting held on Friday in New Delhi by power secretary Sanjiv Sahai between the states and the company, an official said.

Sahai played a key role initiating dialogue between the UMPP and states to put the long-drawn battle to rest. He had asked the states to expedite decision on higher tariff to Mundra ahead of summers and directed Power Finance Corp to take legal opinion from additional solicitor general.


This time the resolution is backed by an opinion from the additional solicitor general that though a common power purchase agreement (PPA) was signed between Tata Power and the five states, it can be altered separately with each state.

Tata Power managing director Praveer Sinha confirmed the developments and said it is awaiting minutes of the meeting based on which the state governments can take next steps of signing the supplemental PPAs and submitting them to the Central Electricity Regulatory Commission.

As per the consensus, the states not willing to offer compensatory tariff to the Mundra project have accepted penalty of 20% of the fixed cost of the electricity, as provided in the PPA. The compensatory tariff was recommended by a three-member high powered committee set up by Gujarat. The company will be able to sell the quota of power of the disagreeing states elsewhere including in the open market, the official said. Sources said Gujarat, which buys about 48% of the capacity, is keen to source more power that costs less to it. The company’s outgo to Rajasthan and Haryana is estimated at ?45 crore each annually, he said. Maharashtra and Punjab will soon take the proposal offering compensatory tariff to state cabinets, the official said.

“There have been extensive deliberations between the company, states and the power ministry played a key role in reaching an agreement. We will take the proposal to cabinet without any further delay,” an official in Maharashtra said.

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Written by sortiwa

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