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Informist, Tuesday, Dec. 16, 2025

 

--Sources: Gujarat, Tata Power set to sign pact to restart Mundra plant

--Sources: Gujarat, Tata Power exchange draft power purchase pact for Mundra

--Sources: Tata Power wants to restart Mundra 4 GW plant by Dec 31

--CONTEX: Tata Power's Mundra 4 GW plant shut since Jul 3

--Sources:Gujarat govt, Tata Power iron out most differences on Mundra plant

--Sources: Tata Power to run Mundra plant at 90?ficiency vs 85?rlier

--Sources: Tata Power, Gujarat agree to share profits of Indonesian coal 

--CONTEXT: Tata Power uses Indonesian coal for Mundra plant 

--Sources: Tata Power may withdraw legal challenges related to Mundra plant

By Sunil Raghu

 

AHMEDABAD – Tata Power Co. Ltd. has largely agreed with the Gujarat government's views and exchanged draft power purchase agreements with the state government after nearly four years of talks to resolve disagreements, paving the way to restart the 4,000-megawatt Mundra power plant, two state government officials told Informist.

 

"Tata Power officials have been saying they want to restart the closed Mundra power plant by Dec. 31 and wanted us to finalise and sign the power purchase agreement, or PPA, before that," a senior state government official told Informist. "We have shared our PPA draft with them, and if everything turns out to be acceptable to us, Gujarat Urja Vikas Nigam Ltd. and Tata Power should sign the PPA by early 2026."

 

Restarting operations at the Mundra plant is crucial, as it accounts for nearly a fourth of Tata Power's total electricity generation capacity of 16 gigawatts. The plant, which has five supercritical units of 800 MW each, accounted for INR 112.9 bln, or 17.5% of the company's consolidated turnover of INR 645.02 bln in 2024-25 (Apr-Mar).

 

The Gujarat government and Tata Power have been in talks for nearly four years to reach an agreement on several contentious issues and sign a new power purchase agreement to keep the Mundra power plant running. The plant has been operating intermittently over the past 15 years. The proposed restart of Tata Power's Mundra plant is contingent on signing the new power purchase agreement.

 

Tata Power secured the Mundra project through its wholly-owned subsidiary, Coastal Gujarat Power Ltd., in 2006 through competitive, tariff-based bidding, with 55% of fuel costs fixed and a levelised tariff of INR 2.26 per unit. Coastal Gujarat Power, since merged into Tata Power, signed a similar PPA with Gujarat, Rajasthan, Maharashtra, Punjab, and Haryana to supply power. The other four states are expected to broadly follow the PPA norms finalised with the Gujarat government.

 

Tata Power used imported coal from Indonesia to fire the Mundra plant. A dispute arose when Tata Power began incurring additional costs as Indonesia levied duties on coal exports. Tata Power sought to pass on these additional coal costs, but this was opposed by the states that had signed PPAs, as the agreements did not allow pass-through of increases in imported coal costs. After litigation across multiple forums, the Supreme Court approved a settlement in February 2022 between Gujarat Urja Vikas Nigam and Tata Power.

 

The only other option for Tata Power to operate the Mundra plant is for the government to invoke Section 11 of the Electricity Act, 2003. The invocation of Section 11 allows power producers to recover their actual fuel costs from electricity buyers. For Tata Power's Mundra plant, this arrangement was in place from May 2022 to Jun. 30, 2025. With the provision ceasing to be in force from Jul. 1, Tata Power's Mundra plant generation has remained suspended since Jul. 3.

 

KEY ISSUES

According to sources, one contentious issue that appears to have been resolved is the indexation to be used to fix coal costs. Both sides are understood to have agreed to index coal prices to either the Argus-McCloskey indices or the Platts Kalimantan benchmarks, ensuring fuel costs reflect real-time market movements and allowing pass-through of fluctuations in imported or traded coal prices. The two sides are also said to have agreed on a formula to decide the transportation cost of coal from Indonesia to Mundra. Freight costs affect the final cost of power. Discussions centred on whether freight would be calculated on a free-on-board basis, under which Gujarat Urja would bear cost, risk and responsibility once goods are loaded on the ship, or on a cost, insurance and freight, or CIF, basis, under which Tata Power would pay for goods, insurance and freight to Mundra port.

 

The state government wants Tata Power to maintain a plant efficiency level of 90% for tariff calculations. Tata Power had earlier insisted on 85%, but has now apparently agreed to the government's view. A higher efficiency assumption lowers the allowable fuel cost per unit, reducing the recoverable tariff.

 

The state government also wants the Tata group to share profits earned from the coal mines it owns in Indonesia, from which coal would be sourced for the Mundra plant. Earlier, the government had sought a share of the entire profit from these mines. Both sides are understood to have agreed to a proportionate profit-sharing arrangement, officials said.

 

Another issue involved the withdrawal of all litigation arising from disputes related to the Mundra plant. Government officials have sought the withdrawal of all cases filed by Tata Power against the government and its entities.

 

The two sides also differed on the effective date of the new PPA. While Tata Power wants the agreement to take effect from Jul. 1, 2025, the state government maintains it cannot be retrospective and should take effect only upon signing. "We believe Tata Power will most likely agree to the government's view on this too," a state government official said.

 

At 1515 IST, shares of Tata Power were at INR 379.90 on the National Stock Exchange, down 0.4%.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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