TATA Power's ambitious plan to generate 25,000 MW, with about INR 100,000 crore investments, will largely depend on sale price of electricity from its 4,000 MW Mundra project amid concerns that its costs could become commercially unviable due to higher price of coal.

The TATA Group firm is staring at an annual loss of INR 500 crore from the very first year of Mundra Ultra Mega Power Project's operations, as higher prices of coal, which was to be imported from Indonesia, have derailed the company's cost calculations.

Mr Anil Sardana MD of TATA Power told PTI that "Now all our investment portfolio will depend on decision on solution to Mundra UMPP. We are very clear that unless this issue is settled, we should not decide as far as our future capacity addition is concerned.”

At current coal prices, the cost per unit of electricity generated from INR 17,000 crore Mundra UMPP, would go up by 60 to 65 paise from the present tariff fixed at INR 2.26 per unit through competitive bidding in 2006.

Mr Sardana said that "Suppose at current price of USD 120 per tonne, we will have huge losses in the variable side and which could mean that we will have a first year loss of INR 500 crore.”

The Tata Group firm, which currently has power generation capacity of 3,797 MW, has ambitious plans for 25,000 MW capacity by 2017. Of this, 4,000 MW will come from Mundra, the first Ultra Mega Power Project in the country.

According to industry standards of INR 4 crore to INR 5 crore cost for 1 MW power generation, the company would require investments of INR 85,000 crore to INR 1,00,000 crore to achieve the target.

However, a new Indonesian law has deprived the TATAs from the cost advantage on coal imports from the East-Asian country as it will not be able to source the Indonesian coal at discounted rates.

(Sourced from ET)