Ministry not to mediate in UMPP tariff hike plea

PTI New Delhi | Updated on August 18, 2011 Published on August 18, 2011

Tata Power and Reliance Power are clamouring for a revision in the tariffs of their 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 (UMPP) 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 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.

“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.

Published on August 18, 2011
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