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Tata Power Moves Closer to Restarting Mundra Plant After Gujarat PPA Approval

Revised agreement enabling coal cost pass-through seen as key to restoring operations and financial stability. Tata Power is nearing the restart of its imported coal-based power plant in Mundra, following approval of a supplemental power purchase agreement (SPPA) by the Gujarat government. The development paves the way for reviving operations that have remained suspended for nearly six months.

Confirming the progress, Praveer Sinha, Managing Director and CEO of Tata Power, said the company is set to sign the agreement with the state’s distribution companies shortly, which will allow the plant to resume operations.

The shutdown had followed the withdrawal of the Centre’s Section 11 directive last year. The directive had earlier required power plants to operate under exceptional circumstances while compensating them for elevated fuel costs. Its removal made operations financially unviable for imported coal-based plants.

Under the revised PPA, Tata Power will be allowed to pass through actual coal costs, addressing a major issue that previously led to operational losses. The company had reported losses of nearly Rs 1,000 crore during the financial year due to the plant’s closure but now expects financial recovery once generation resumes.

The agreement with Gujarat is likely to act as a model for similar arrangements with other states, including Maharashtra, Rajasthan, Punjab, and Haryana, which also procure electricity from the Mundra facility. The company indicated that discussions with these states are ongoing and could conclude in the coming weeks.

Analysts, however, note that the financial implications will depend heavily on the detailed terms of the agreement. The tariff structure is expected to be broadly aligned with rates previously permitted under Section 11, as well as similar arrangements seen in earlier deals involving the Adani Group and the Gujarat government.

The timing of the restart is significant, as India heads into the high-demand summer season when power supply constraints are expected to tighten. There is also speculation that the government could reintroduce emergency measures similar to Section 11 if required, particularly amid concerns over limited availability of gas-based and hydroelectric power.

Coal continues to dominate India’s electricity generation mix, contributing roughly three-fourths of total output. While renewable energy capacity is steadily expanding, thermal power plants remain crucial for meeting peak demand.

On the market front, Tata Power’s shares saw notable movement, touching an intraday high of Rs 418.40 before closing at Rs 402.75 on the Bombay Stock Exchange, reflecting positive investor sentiment around the development.