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It now appears to be the turn of Tata Power to point out to the Power Ministry the spiralling coal price and its impact on the viability of its 4,000-MW Mundra Ultra Mega Power Project (UMPP).
Reliance Power has reportedly halted work at its 4,000 MW Krishnapatnam UMPP, citing banks' refusal to fund the project following the rise in coal prices.
The Rs 17,000-crore Mundra plant of Tata Power is on track and the first unit of 800 MW is ready, ahead of schedule. In a communication to the Power Minister, Mr Sushil Kumar Shinde, the Chief Executive Officer and Executive Director of Tata Power's Coastal Gujarat Power, Mr Alok Kanagat, has said that coal prices have shot up so much that, at current rates, it was unviable. He said initial calculations (based on Central Electricity Regulatory Commission norms) providing for 14 per cent return on equity would be around Rs 600 crore per annum, while the impact of the price change could be up to Rs 1,800 crore. In terms of tariff, the impact could be up to Re 1 a unit of electricity. Mr Kanagat sought the Ministry's intervention to direct stakeholders (state utilities) to open a dialogue to address the issue of imported coal pricing.
Escalation rate
Citing the methodology prescribed by the Central Electricity Regulatory Commission for determining escalation rates, he said it is classified into two — the bid evaluation escalation rate to facilitate the evaluation process and the actual payment escalation rate to arrive at the actual amount payable after the plant begins operation.
At the time of bidding for the project, CERC notified escalation rate of 3.46 per cent for energy charges. However, between the bid date (2006) and today, the cumulative escalation works to only about 17 per cent, while the actual increase is 150 per cent.
As of now, Coastal Gujarat Power would have to import coal at an additional cost of $40 a tonne despite having a firm coal supply contract. Mr Kanagat, said the company had quoted “non-escalable fuel energy charges” of 55 per cent and “escalable fuel energy charges” of 45 per cent.
Responding to queries, Tata Power, in a statement, said: “Mundra had made all contractual preparations, including linkages through linked mines abroad, for imported coal, linked ports at both ends and shipping for reliability.”
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