Tata Adds 1,600 Megawatts to 4,000-Megawatt Mundra Ultra-Mega Plant

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Tata Power Company Limited is planning to add a further 1,600 megawatts (MW) of generating capacity to the ultra-mega power project at Mundra in Gujarat. The addition will give the project a total capacity of 5,600 MW, making it the largest power station in India. It will easily top the present holder of the No. 1 position, Adani Power Limited's 4,620-MW plant, which is also sited at Mundra. The capacity addition will involve an investment of $1.5 billion for over three years.

The company intends to use the added capacity to sell electricity in the open market to boost profits. Mundra's profit profile has been hit by rising coal prices, which are eating into its bottom line. In 2007, Tata Power won the Mundra project bid by quoting the lowest tariff of Rs 2.26 (rupees) a unit, and it signed power purchase agreements for the sale of power to distributors in Gujarat, Maharashtra, Haryana, Punjab and Rajasthan--all at the low bid price.

There have been higher coal prices, especially for the imported coal to feed Mundra. This situation is exacerbated by the fact that imports became even more costly when the Indonesian government levied higher royalty and income tax. In 2007, Tata Power paid $1.1 billion for a 30% stake in two coal mines and a trading company in Indonesia.

Selling electricity in the open market from the additional capacity could ease the company's financial bind. The cost of power in the open market is about Rs 3.5 per unit on average.

The Gujarat government has signed an agreement with Tata Power for the addition of 1,600 MW at Mundra and the sale of that power in the open market.

Adani Power Limited and Tata Power have approached the Central Electricity Regulatory Commission to consider increases in their power tariffs after customers declined to pay higher rates for the power generated from their imported coal-based power plants. A decision on the matter is expected this month. For related information, see January 14, 2013, article - Unit 4 Synchronized at Mundra's 4,000-Megawatt, Ultra-Mega Power Project in Gujarat

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