Tata Power to lose Rs 500 crore in 4,000 MW Gujarat project

Expensive Indonesian coal may cost Tata Power to lose Rs 500 crore in the first year of commissioning of its 4,000-Mw ultra mega project at Mundra, in Gujarat.

A new Indonesian law that requires benchmarking of coal sales to an index-based price linked to global rates will deprive Tata of the cost advantage on coal imports. This will necessitate Tata revisiting its cost calculations on the Mundra UMPP.

“It  will depend upon what is the prevailing prices of coal. Suppose at current price of US $120 per tonne, we will have huge losses in the variable side and which could mean that we will have a first-year loss of Rs 500 crore,” Tata Power Managing Director Anil Sardana told in an interview.

At current prices, the Indonesian coal that will be used to run the Mumdra UMPP would increase power generation costs by 60 to 65 paise per unit, he said, adding that the company has sought a meeting with the buyer states at the end of this month to find a solution.

Today, the rate is Rs 2.26 per unit and if “you add that 60-65 paise, it becomes Rs 2.90 per unit”, Sardana said. It will still be the cheapest imported coal-based power unit ever, Sardana claimed, although he said it is up to the buyer states to find out the solution.