India has initiated ultra mega power projects sometime back which got into trouble due to increase in imported coal prices thereby impacting the financial viability of the projects.
Tata Power had asked for a tariff revision for its project at Mundra.
Central Electricity Regulatory Commission (CERC), in April this year, had allowed Tata Power to pass on to consumers high cost of coal imported from Indonesia for the Mundra unit, which supplies power to five states.
Maharashtra State Government has recently approved the tariff revision for Tata’s Mundra project; albeit with some riders.
One being that the tariff should come down if price of coal used decreases . The State has also asked the project investors to come down on their expectations of RoE [ return on equity].
The State has also asked lenders to reduce their interest rates.
Punjab and Haryana, two other states that receives power from Mundra UMPP, have, on the other hand, opposed the CERC nod to hike in tariff and have moved the court against the decision.
Can something like this happen in India’s wind and solar space? No… since the inputs are from nature and free– wind and sun. Nevertheless, the State of Gujarat had tried recently tried to reduce tariff due to solar power projects commissioned under Phase I. The logic was that the plants were commissioned when the prices of the solar products in the market had reduced compared to the time when the policy / tariff was announced.
Whatever be the case; the bottom line is that power projects require huge funding and most of these funds come from outside India. The government therefore needs to install confidence in the industry through right policies and approach.
An earlier blog article was written on the same theme:
India’s growth is difficult without all areas getting sufficient power and if this sector itself is struggling to make ends meet or due to lack of confidence; then the country is in for a tough time.