Source - Business Standard
TATA Power is set to commission the country’s first ultra mega power project unit this quarter. This comes with the challenge to overcome the rise in fuel cost due to a regulatory change by Indonesia, where it sources coal from and owns mines.
Mr S Ramakrishnan executive director finance of TATA Power in an interview with Katya B Naidu and Arijit Barman tells how they plan to cope with the situation.
Q - There are a lot of reports on coal shortages and project delays. How has your project pipeline been affected?
A - The acute shortage of domestic coal is a concern for the sector as a whole. Only two of our units are based on domestic coal Jojobera and Maithon. In Jojobera, we also get supply from TATA Steel in case of any deficiencies, but we have not seen any. In Maithon, the railway infrastructure may take six-nine months to get ready. Once that is done, we can import and pass on the fuel costs. The first 800 megawatts unit of Mundra should come in by this financial year.
Q - Does Mundra paint a dismal picture with the change in coal import regulations? Indonesia indexed exported coal prices to international prices, and that changes the cost dynamics.
A - While the Mundra project is on schedule, it may be impacted by changed specifications and cost dynamics, since the law in Indonesia changed. The regulation pulled us back by USD 500 million in those five years, as compared to a situation where the contracts were honoured. As the coal price goes up, we benefit as owners, and lose as consumers. Our last two years' performance reflects the benefits of coal ownership, without consumption exposure. From now, the coal ownership benefit will be reduced to the extent of consumption.
With mines in Indonesia, we have the hedge in terms of performance of the company. But Mundra, by itself, will lose money. Power developers have requested the government to look into the larger issue of dealing with imported fuels and evolve a mechanism to compensate producers, in rates.
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