OREANDA-NEWS. January 14, 2013. Coastal Gujarat Power (CGPL), a wholly owned subsidiary of Tata Power Company, has invoked its rights under the Power Purchase Agreement (PPA) and has decided to discontinue the supply of power to the three Rajasthan state-owned distribution companies (discoms) from its Mundra Ultra Mega Power Project (UMPP) due to non-compliance on payment security related issues. This follows its several notices to the discoms required under the PPA, thus, effectively terminating its contract. The three Rajasthan discoms account for 10 percent of the total capacity from Mundra UMPP.

Due to consistent failure on the part of Rajasthan discoms as procurers to fulfil the obligations, including collateral arrangements, in spite of repeated and regular reminders, CGPL was constrained to issue notice to the Rajasthan state discoms. Rajasthan discoms have been regularly defaulting in timely payment of its dues, leading to large outstanding dues.

Mundra balance of payments on account of fuel tariff is already a challenge as recovery through tariff is lower than spending. With continued non-payment and non-availability of payment security, the company is finding it difficult to manage payment for its obligations to buy fuel and discharge its various obligations. The company will make alternate arrangements for contracting and selling power.