Rajasthan board clears dues to Tata Power unit

Tags: News
Rajasthan State Electricity Board has bowed to pressure from The Tata Power Company and made an immediate payment of Rs 90 crore worth of overdues to its troubled Mundra ultra mega power plant (UMPP). Tata Power had threatened to annul its power sale agreement with Rajasthan citing non payment and instead sell its share of power to other long term buyers.

Rajasthan is to be supplied around 10 per cent of the power to be generated by India’s first UMPP. While the default has now been cured Tata Power (TPC) is now demanding that the state utility provide proper collaterals and securitisation as per the power purchase agreement that can protect it from any future defaults of a similar nature.

A senior official of Jaipur Vidyut Nigam, one of the purchasing discoms told Financial Chronicle that most of the discoms are facing problems in the country especially in availing bank loans due to the poor financial health. The delay in making the payment to TPC was on account of non availability of loan. We have made the payment to Tata Power yesterday. Also, TPC’s concern on collateral was taken care long back in 2007, where we have an escrow account with bankers, line of credits and also the right to pari passu charge on the amount from the discoms’ revenues in case of default,” said the discom official.

TPC spokesperson, however, denied the claims of Rajasthan official stating that “most of the collaterals and securities are not in compliance with the power purchase agreement”. “We maintain that due to consistent failure on the part of Rajasthan discoms as procurers to fulfil the PPA obligations especially collateral arrangements in spite of repeated and regular reminders and large outstanding, Coastal Gujarat Power (CGPL) was constrained to discontinue power supply to Rajasthan State Discom,” said the TPC spokesperson in an email response.

“The outstanding payments have been made by Rajasthan only after termination of the contract. However, the reason for termination is the payment security documentation which is yet to be complied with,” the email added.

“We have given notice regarding discontinuation of supply to Rajasthan discoms with copy to load despatch. We are awaiting load despatch to act as per our letter, despite specific responsibility of theirs to act. We are already running a plant that is stressed due to costly raw material inputs, we cannot take further stress in form of delayed payments from the discoms. The discoms from Rajasthan continue to dishonour the PPA by not providing the collaterals on the payments to take care of any serious lapse,” said the Tata Power spokesperson.

AK Prabhakar, vice president and head of retail research of Anand Rathi said that discoms are having serious problems in meeting their obligations of making basic payments for procuring power. “Unless the premium and penalties on borrowings are waived or written off to reduce the burden of discoms, they will find it difficult to sustain themselves.” Many state owned utilities lose money as they are forced by state policies to sell power below their cost of supply. High losses caused by thefts and poor state of transmission and distribution infrastructure further aggravate their woes.

TPC in its termination notice to Rajasthan recently said it may even look at selling the power allotted to the state utility to third party buyers.

Tata Power’s Mundra Power plant is incurring a loss of around Rs 400 crore on account of costly imported coal while the non-payment creates need for borrowings and associated interest costs. The company has already synchronised four units of the 3,960 mw UMPP. The fourth 800 mw super critical unit got synchronised on Monday taking the total generation capacity of the company to 7,700 mw.


  • Finance ministry must stand its ground on lower EPF interest rate

    In quick succession, yet another controversy is brewing with regard to affairs of the employees provident fund organisation (EPFO).


Stay informed on our latest news!


Amita Sharma

Sanskrit: a victim of academic schizophrenia

J Robert Oppenheimer, the father of the atomic bomb and ...

Zehra Naqvi

God save the child

Childhood is supposed to be the best phase in life. ...


William D. Green

Chairman & CEO, Accenture