India has directed private-sector utility Tata Power to restart its 4GW imported coal-fired Mundra power plant in Gujarat and operate all units to meet an expected rise in electricity demand in the peak summer months.
The power ministry issued the order under section 11 of the Electricity Act to Coastal Gujarat Power (CGPL), the Tata Power subsidiary that operates the plant, a senior government official told Argus. Section 11 empowers the government to instruct imported coal-fired plants to maximise output to meet power demand. Tata Power did not respond to a request for comment.
The directive comes as India braces for a strong heatwave that could support electricity consumption. It also follows a sharp rise in international coal prices, freight and delivered costs in recent weeks due to conflict in the Middle East. The government was considering invoking section 11 ahead of the summer, Argus reported on 5 March.
A previous section 11 order remained in effect for over three years before expiring on 30 June 2025. The Mundra plant subsequently remained offline following a prolonged maintenance shutdown last year.
India's Central Electricity Authority — the power ministry's technical arm — has projected potential shortages of 10-12GW at peak summer demand under one peak demand scenario. The India Meteorological Department expects a hotter than normal summer — despite unseasonal rains in parts of the country —which could boost air-conditioning use and overall power consumption.
The latest directive covers only the Mundra plant, but India has more than 18.7GW of imported coal-fired capacity — roughly 9pc of coal-based capacity and 4pc of total installed capacity. Some of these plants have recently conducted trials to blend domestic coal. Authorities could later consider extending section 11 directive to other imported-coal-fired utilities, but this would primarily hinge on the summer power demand trajectory.
Much of India's imported coal-based fleet has run at low utilisation levels because some key long-term power purchase agreements do not always allow full passthrough of higher fuel costs. Under section 11, authorities typically permit limited passthrough, allow sale of surplus electricity on exchanges and grant some operational concessions.
Supplementary tariff
Tata Power may be able to ramp up Mundra output after the Gujarat government approved a proposal to raise the tariff at which the plant supplies power to the state, enabling higher imported fuel costs to be passed through. The state recently approved a supplementary power purchase agreement between the utility and state-owned distributor Gujarat Urja Vikas Nigam, Tata Power said on 20 March.
Tata Power has sought such approval for several years to offset the surge in imported coal costs. Higher tariffs could help revive the loss-making plant, which started operations in 2012. Tata Power has attributed persistent losses to Indonesia's regulatory changes that required coal suppliers to sell at benchmark prices, significantly raising coal costs and undermining the company's long-term pricing assumptions for Mundra.
Tata Power would also need to seek supplementary agreement with other states that have signed up for the electricity from the Mundra plant, but Gujarat's approval and the direction from the federal power ministry could mean that the plant that typically consumes 10.5mn-11.5mn t/yr of imported coal may soon be operational.
The directive from the power ministry could be a pre-emptive step rather than a response to any immediate fuel shortages given that India is sitting on record coal inventories on the back of strong domestic output growth and softer demand. Combined stocks at plants, mines, ports, transit and stockyards are estimated at close to 220mn t. Most incremental summer generation is expected to be met by domestic coal-fired plants, which supply the bulk of India's electricity. Coal-fired output accounts for the bulk of India's overall generation.
India imported 160.15mn t of thermal coal in 2025, down by 3pc or 5.2mn t from a year earlier, according to shipbroker Interocean. Power utilities are estimated to have taken around 50mn t of this total.
