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Informist, Monday, Mar. 9, 2026

 

--Gujarat govt aide: Tata Power, Gujarat to ink 10-yr power purchase pact 

--Gujarat govt aide: Expect Tata Power to restart Mundra plant by Mar 31

--Gujarat govt aide: Tata Power to keep 60-day coal inventory at Mundra plant

 

By Sunil Raghu

 

AHMEDABAD - Tata Power Co. Ltd. and the Gujarat government are learnt to have reached an agreement on the sole remaining unresolved issue and are likely to sign a new power purchase agreement soon for the supply of 4,000-megawatt power from the Mundra project, two senior Gujarat government officials said on condition of anonymity.

 

"Gujarat government was keen on a 25-year supplementary PPA (power purchase agreement), and Tata Power wanted a 10-year PPA for its imported-coal-based power plant at Mundra. Both have now found a middle path," a senior state government official told Informist. "Only signing the document remains, and hopefully it will get the requisite regulatory nod too. The announcement is due anytime, and the hope is that Tata Power may finally restart the plant before Mar. 31."

 

As per the official, both entities have agreed on over a dozen issues, including the power purchase agreement's tenure. The official said the new agreement would be effective retrospectively from Apr. 1, 2025, and will be for 10 years initially. The pact would be extended unless any of the parties gives a 5-year notice before the end of the term.

 

The Gujarat government and Tata Power have been in talks for nearly four years to resolve several issues, and the latest development finally paves the way for signing the power purchase agreement and restarting the Mundra power plant, which has been shut for nearly eight months now. Restarting the plant is contingent on signing a new power purchase agreement. The shutdown has caused a drag of INR 8 billion to INR 10 billion on Tata Power's net profit in Apr-Dec, IIFL Capital said in a recent report.

 

In February, the Tata Power management had told analysts that it had concluded talks with the Gujarat government, except on one issue. Though the management did not specify the issue, the company said it hoped to close the talks in three weeks. "Mundra is starting soon. It is just a matter of time," Praveer Sinha, the company's chief executive officer and managing director, told Mint on Friday.

 

Besides Gujarat, Tata Power supplies electricity to Rajasthan, Maharashtra, Haryana, and Punjab from the Mundra plant, on similar terms. The management said once it finalises the supplementary power purchase agreement with Gujarat, the company will circulate it to other states for their approval and start firing up the plant.

 

Tata Power has five supercritical units of 800 MW each at Mundra. Supercritical power plants operate above a certain critical temperature and pressure, where water converts directly to steam without the boiling phase, improving efficiency. The Mundra plant accounts for nearly one-fourth of Tata Power's total electricity generation capacity of 16 gigawatts. The project accounted for INR 112.9 billion of the company's consolidated turnover of INR 645.02 billion in 2024-25 (Apr-Mar).

 

Tata Power's wholly-owned subsidiary Coastal Gujarat Power Ltd. had bagged the Mundra project through tariff-based competitive bidding in 2006. The company had quoted 55% of the fuel cost as a fixed component and a levelised tariff or average and constant tariff of INR 2.26 per unit. Coastal Gujarat Power, which has since been merged into Tata Power, had signed power purchase agreements with Gujarat, Rajasthan, Maharashtra, Punjab, and Haryana for power supply. The other states are expected to broadly agree to the power purchase agreement finalised with the Gujarat government.

 

Tata Power primarily used imported coal from Indonesia at the Mundra plant. The dispute arose when Tata Power began incurring additional costs as Indonesia levied duties on coal exports. Tata Power sought to pass on this additional cost, but states opposed it, as power purchase agreements did not allow pass-through of increases in the cost of imported coal. After litigation across multiple forums, the Supreme Court in February 2022 approved a settlement between Gujarat Urja Vikas Nigam (the buyer of power in Gujarat) and Tata Power.

 

"As per the concluded agreement, Tata Power would be able to source coal from any country, including Indonesia, with a caveat that it should seek pre-approval from the Gujarat government on pricing," another state government official said. Tata Power will have to get these approvals at least 48-72 hours before it finalises coal purchase contracts. It will also be required to maintain an inventory of at least 60 days for the Mundra coal-fired power plant, the official said.

 

The official said Tata Power will have to bear losses to date, if any, and Gujarat's power tariff should not exceed that of other buyers. Tata Power will also withdraw the legal cases related to the Mundra dispute, the official said.

 

Tata Power's consolidated net profit for the December quarter fell over 25% on year to INR 7.72 billion, way below the Street's estimate of INR 9.66 billion. Its revenue for the quarter fell by over 9% on year to INR 139.48 billion, well below analysts' estimate of INR 157.77 billion. Monday, the company's shares closed at INR 372.90 on the National Stock Exchange, down 0.7% from the previous day, compared with a 1.7?cline in Nifty 50. 

 

End

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

 

Edited by Saji George Titus

 

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