Tata Power to sell 51% in Mundra project for ₹1
TACKLING DEBT CGPL writes to Gujarat govt, says have exhausted all options
Tata Power has offered to sell 51% stake in its 4,000-megawatt (MW) Mundra power project for ₹1 to states like Gujarat, which buy electricity from it, to rescue the debt-laden, loss-making business.
Coastal Gujarat Power Ltd (CGPL), the Tata Power unit which operates the Mundra project, wrote to Gujarat Urja Vikas Nigam Ltd earlier this month offering to retain 49% stake and operate the project as a contractor, provided the procurers buy all the power at higher tariffs.
In the letter, copies of which were marked to Nripendra Misra, principal secretary to Prime Minister, and power secretary, CGPL CEO Krishna Kumar Sharma said Mundra has accumulated losses of ₹6,457 crore against a paid-up equity of ₹6,083 crore.
Besides, CGPL has outstanding loan of ₹10,159 crore and lenders have stopped further disbursal due to non-viability of the project, he wrote.
Tatas had in February 2006 won the bid for 4,000 MW Mundra project in Gujarat, quoting a price of ₹2.26 for every unit of electricity generated. It had intended to fire the plant with coal imported from mines owned by the Tata Group in Indonesia. In 2010, the Indonesian government said any export of coal could be done only at prices linked to global rates.
Tatas, in turn, sought higher tariffs for power, but the plea was rejected by the Supreme Court.
When contacted, Tata Power said it made the suggestion after exhausting all other option. Bankers, it said, “made a sugges- tion that if 51% equity is taken over on a back to back basis with the procurers, then the procurers would have advantage of competitive power for full life of the plant e.g. 40 years” at “very low and competitive price”.
“CGPL has and will continue to be open to exploring all options, in consultation with stakeholders, for the long term sustainability and viability of the plant in the interest of all stakeholders and would continue its operations with competitive power,” the company said in a statement.
Power minister Piyush Goyal said the company has written to the state government and it was for the procurers and the firm to sort out the issue.
“But as responsible part of the government in the country, the central government is willing to play the role of a facilitator to bring all the stakeholders on the table so that an informed, considered view can be taken,” he said.
The Centre, he said, was not “siting with blinkers or eyes closed or blindfolded”. “We are also conscious of the issues and we will ultimately have to protect the interest of consumer so that the power tariffs through indirect route don’t increase for common man or discoms.”
Sources said CGPL in the letter stated that financial position of the company continues to deteriorate and has reached a critical situation due to substantial loses incurred.
It wanted tariffs to be negotiated or power procurers take over 51% paid-up equity shares of CGPL for a nominal value of R1 and grant relief to the project by purchasing power at a rate to fully address the under-recovery of fuel costs.
In the statement, Tata Power said Mundra project is a national asset that provides close to 2% of India’s power need. “It is unfortunate that due to circumstances beyond the control of the company, the Mundra plant has been reeling in losses year on year.”
“CGPL would continue to work towards exploring all options to stop losses and best contain the onslaught of under recovery on fuel side,” it said.
Mundra project, comprising of five units of 800 MW each, was commissioned between 2012 and 2013. It has signed a 25-year agreements to sell electricity to utilities in Gujarat, Rajasthan, Maharashtra, Haryana and Punjab. Gujarat is the lead buyer.