Gujarat clears PPA With Tata Power to restart 4 GW Mundra plant

Tata Power has announced that the Government of Gujarat has approved a supplementary Power Purchase Agreement (PPA) to revive operations at its 4-gigawatt Mundra thermal power plant, operated by its subsidiary Coastal Gujarat Power.

The approval by the state cabinet has been formalised through a government order. Following regulatory clearances, the agreement will be signed between Tata Power and Gujarat Urja Vikas Nigam Limited.

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Under the revised PPA, Tata Power will resume long-term electricity supply to Gujarat. The company expects to operate the Mundra plant at full capacity soon and recover losses estimated at around ₹1,000 crore.

Tata Power also indicated that similar supplementary PPAs are expected to be signed shortly with other procuring states, including Maharashtra, Rajasthan, Punjab and Haryana.

Earlier, the company had concluded discussions with the Gujarat government in February. During a post-earnings call, CEO & MD Praveer Sinha had indicated that talks with other states would follow to facilitate resumption of operations.

A key feature of the updated agreement is the provision allowing pass-through of coal costs, an issue that had earlier led to financial stress after the power ministry withdrew emergency compensation under Section 11 due to rising fuel prices.

The Mundra plant, located in Mundra, primarily uses imported low-sulphur coal from Indonesia. Operations were halted last year after increased import costs—driven by export duties imposed by Indonesia—could not be passed on under the earlier PPAs, leading to disputes with procuring states.

After nearly four years of negotiations, the new agreement paves the way for the plant’s restart following an eight-month shutdown.

The Mundra facility is strategically significant for Tata Power, contributing nearly one-fourth of its total generation capacity of 16 GW and supplying electricity to multiple states, including Rajasthan, Maharashtra, Haryana, and Punjab.