Gujarat Government Approves New Tata Power Deal to Resume Long-Term Power Supply

Tata Power Shares Rise 4% Following Gujarat Government Approval

Tata Power's shares surged up to 4% on March 20, following the approval of a revised power supply pact with the Gujarat government. This development clears the way for the company to resume long-term supply from its 4-gigawatt Mundra plant.

The Mundra plant, an imported coal-fired facility, has been idle for the past six months. The government's withdrawal of the emergency clause that compensated companies for generating power using expensive imported coal was the primary reason for the plant's shutdown. The deal comes as a relief to India, which is looking to maximize power output from its coal plants amid an escalating Middle East conflict that is expected to lead to a gas shortage during summer.

The revised power supply pact requires approval from the power regulator and will take effect retrospectively from April 2025. At 11:45 am on March 20, Tata Power shares were trading 2.7% higher at Rs 409.4 apiece.

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The agreement mandates that the price of power supply must not exceed the rate paid by other states. In February, Tata Power posted a marginal rise in consolidated net profit at Rs 1,194 crore in the December quarter, driven by lower revenues. The company's total income declined to Rs 14,269.08 crore in the third quarter of the current fiscal year, a 10% fall from Rs 15,793.43 crore in the year-ago period.