Cost-Reflective Tariffs To Help Mundra Plant Operate At Full Capacity: Tata Power CEO
The Mundra plant is operating only one unit now as supplies to four procurer states were stopped over supplementary tariffs.
Tata Power Co. has said it is in discussions with the state procurers for its 4,000 MW ultra-mega power project in Mundra, Gujarat, for supplementary power purchase agreements.
The power generation firm expects the recent tariff, which was decided by the Central Electricity Regulatory Commission under Section 11 of the Electricity Act, to be benchmarked for the supplementary power purchase agreements.
In January, the CERC decided to fully compensate the power plants that are dependent on imported coal and running at full capacity with higher costs under the directions of the Ministry of Power for meeting the electricity demand.
The CERC's order came after Tata Power had approached it in May last year, seeking a higher tariff than the one fixed by the Ministry of Power for its imported coal-based Mundra project.
"We believe the tariffs under Section 11 are cost-reflective and will help the plant operate at full capacity," Tata Power Chief Executive Officer and Managing Director Praveer Sinha told BQ Prime in an interview.
"If the tariffs are not reflective of the cost, it will be very difficult to continue to operate the plant," Sinha said.
India witnessed a serious power crisis in 2022 due to coal supply-related issues. The Union government had to enforce Section 11 of the Electricity Act till Dec. 31, 2022, seeking compulsory operation of imported coal-based power plants at full capacity across states. The states were also forced to compulsorily import 10% of the coal requirement for non-imported coal-based plants.
The Tata Power CEO believes that since the Mundra plant operates at high efficiency and produces power at very low cost, the supplemental PPAs will help the power produced to be scheduled under the merit order dispatch.
The plant is operating only one out of its five units presently as supplies to four of the five procurer states—Haryana, Rajasthan, Punjab and Maharashtra—were stopped over supplementary tariffs to compensate for the higher cost of coal. The company continues to supply power to Gujarat from one operational unit.
Sinha said the December quarter was good for the Mundra plant in terms of operational performance.
"There was always the challenge of tariff not being cost reflective," he said. "Fortunately, because of Section 11 directions and tariff determined by the CERC, it has become cost reflective."
Sinha hopes this will become the benchmark for determining the new tariff or the supplementary PPAs with the procurers that the firm are in the process of finalising.
The plant incurred losses in each quarter of the financial year. But during the period it operated under Section 11 till Dec. 31, 2022, the cost incurred was a pass-through. Hence, the plant performance was good, Sinha said.
The total debt for Mundra pending for payment is close to Rs 10,000 crore as of Dec. 31 and it needs to be paid over the project's life term of 30 years, he said.
High PLF and Peak Power Demand
Tata Power's plant load factor or the utilisation level of the thermal power plants in the third quarter averaged around 70%, compared to 63% of the national average. The rise was on account of around 10% increase in power consumption over the last nine months and 12% increase in December.
"We produce low-cost power due to proximity of our plants with coal mines and our ability to tie up cheap spot and mid-sea coal. That helps us to get merit order dispatch for our power produced," he said.
Peak Power Demand May Touch 240 GW
The peak power demand is expected to touch 240 GW this summer. The demand has already touched 200 GW in December, Sinha said.
However, since then the coal situation has improved, but the peak demand of 240 GW can still create problems if not handled properly.
India can handle the situation if all the capacities—conventional, coal, hydro and renewables—operate at full capacity, Sinha said.
"If a timely decision is taken on Section 11 of the Electricity Act, many of the conventional plants and some of imported coal-based plants that were handicapped by shortage of coal will be able to operate at full capacity," Sinha said.
In general, the coal stock position has also improved at the power plants as compared to last year, he said. "The ramping up of dispatch of coal through road and rail will help us meet the peak requirement this summer."
With regards to availability of coal, Sinha said the country needs help from all participants.
Coal India Ltd. and all their subsidiaries along with commercial mining companies will have to contribute to augment the output, he said.