Tata Power Company Ltd, which runs the 4,000 MW ultra mega power project at Mundra in Gujarat, targets to add another 1,600 MW capacity to the power station.

The private power producer is exploring setting up additional two units of 800 MW each expanding the overall capacity of the Mundra power plant project from 4,000 MW to 5,600 MW, said Krishna Kumar Sharma, Executive Director and Chief Executive Officer of Coastal Gujarat Power, the Tata Power company that runs the power station.

New units not under existing arrangement

However, the electricity generated from the new 1,600 MW capacity would be sold at different tariff from the existing rate for 4,000 MW. In 2006, the Tata Group firm bagged the UMPP project through competitive bidding quoting a levelised tariff of Rs 1.26 a unit for 25 years.

"These two units are not covered through any existing arrangement for pricing and thus could participate in any new case-I bidding with imported coal. The cost of generation will depend on type of coal and capital costs once they are completed," Sharma said.

The new units would be based on imported coal and set up within the same 1,300 hectare area allocated to the mega power project. Currently, there are five operational units of 800 MW each that sells electricity to Rajasthan, Gujarat, Punjab, Haryana and Maharashtra.

Cost factor

The new capacity would require 36-40 months for commissioning once all approvals are in place, according to the company. In the present scenario, setting up 1,600 MW may cost Rs 8,000-10,000 crore.

"As far as costing is concerned, appropriate funding will be arranged. We are reviewing all our options before we can finalise on the project. As regards land, we had kept provision for future expansion of two units in the layout," Sharma explained.

Industry watchers say that the decision with regards to compensation tariff sought by Tata Power for electricity currently generated from the UMPP is crucial for expansion.

"CGPL’s estimated revenue loss of running the power plant at current rates stands at approximately Rs 1,800 crore a year. As of October, 2012 equity investment of CGPL has eroded by approximately Rs 3,000 crore," said Sharma.

The 4,000 MW costs Rs 17,000 crore. Of this, Rs 4,250 crore is equity and remaining are loans.