The Indian power ministry is looking at extending the Section 11 directive for the imported coal-based Mundra power plant, which would keep the unit running at full capacity until December amid high electricity demand, according to people familiar with the matter.

The 4,000 MW plant, owned by Tata Power, is currently operating under these special provisions, which are set to expire this month. The Centre is likely to extend the requirement given the continued strong domestic power demand, the people said.

The order will be issued under Section 11 of the Electricity Act. The provision gives the government, at the central or state level, the power to issue directions to a power generation company in "extraordinary circumstances" and in the interest of the public, requiring it to operate and maintain a station as directed. In simple terms, the government can compel a plant to generate electricity to keep the grid stable.

The Mundra plant is an imported coal-based facility, and its generation cost is far higher than that of plants using domestic coal. If it relied only on market forces, it would have little incentive to generate power when coal prices are high. The government is therefore using a Section 11 directive to force it to run at full capacity.

The Mundra plant has a supplemental power purchase agreement (SPPA) with Gujarat Urja Vikas Nigam Ltd, while talks are ongoing with other states.

"Discussions with Rajasthan, Haryana and Punjab to sign SPPAs are at an advanced stage," said one of the people cited above. An SPPA is needed for the plant to fully pass through volatile imported coal costs and keep the capacity available for supply.

Peak power demand in the country surpassed the projected 271 GW in September, unusually high for the month, driven by cooling and irrigation needs after a deficit monsoon.

Thermal plants are critical for meeting high demand, particularly during non-solar hours. This year's projected peak was 271 GW, above last year's summer peak of 243 GW.

The power ministry did not respond to an email query. Power from imported coal-based plants usually costs more than that from plants using domestic fuel. The ministry has invoked Section 11 provisions in phases over the past few years as cooling demand surged.

Since imported coal-based capacity is needed to meet peak demand, the Centre has been working on a way to lower the cost of running such plants. The ministries of power and coal have been discussing including domestic coal as part of the fuel mix, given the ample supply of higher-grade coal in the country. However, such blending is not currently possible because of the design of these thermal plants.