India's Policy Shift Impacts Project Viability

The dispute between Mitsubishi Power India (MPI) and National Thermal Power Corporation (NTPC) over the Farakka FGD installation project stems directly from shifting environmental policy in India. In July 2025, the government significantly relaxed its existing mandate on flue gas desulphurisation (FGD) systems, exempting approximately 78% of coal-fired power plants from installation requirements. This policy change, citing India's low-sulphur coal and limited health gains from widespread FGD adoption, has significantly changed the market for emission control technologies. For companies like MPI, which had secured contracts for such installations, this policy shift means lower expected revenue and less strategic importance for such projects. This likely prompts the desire to exit incomplete contracts like the one at Farakka, where only the first of three stages has been finished.

Dispute Over Settlement Amount

The core of the dispute is a large financial gap. NTPC is demanding over ₹1,200 crore from Mitsubishi Power India Private Limited for the incomplete project, while the Japanese firm has reportedly offered around ₹720 crore as a settlement penalty. This shows the ongoing talks to bridge the gap and settle liability for the unfinished work and project delays, which were apparent even before the policy change. The project's location in Murshidabad district, West Bengal, places it outside the most densely populated areas that would still mandate FGDs under the revised rules, making it less valuable under the new regulatory landscape.

NTPC's Financial Strength vs. MPI's Challenges

National Thermal Power Corporation (NTPC) is financially strong and widely trusted. As India's largest energy conglomerate, it has a market value of about ₹3.95 trillion as of April 2026. Its P/E ratio is around 16.11 to 24.83, often seen as a value stock. Analysts recommend 'Strong Buy' for NTPC, with a 12-month price target averaging around ₹424.88, due to its steady financial growth, including revenues over ₹1.88 lakh crore in March 2025. In contrast, Mitsubishi Power India, part of Mitsubishi Heavy Industries, has faced major financial problems. Even with financial help from its parent, including a large injection in August 2025, MPI has reported ongoing losses and negative net assets. Its FY25 revenue was ₹298 crore, much smaller than NTPC's, and it mainly handles sales and services, not just large projects.

Power Sector Competitors and Market Dynamics

The Farakka dispute comes amid changing conditions in India's power and infrastructure sectors. NTPC operates with strong finances and steady profits, unlike its public sector peer Bharat Heavy Electricals Ltd (BHEL), which faces challenges with a much higher P/E ratio (around 150.08) and lower returns. Larsen & Toubro (L&T), a diverse company, has a stronger financial profile with a higher P/E ratio (around 33.98) but works on a wider range of infrastructure and engineering projects. The relaxed FGD rules mean less demand for specialized environmental services, affecting companies like MPI and possibly their strategy. While the sector continues to move towards cleaner energy, the policy change has immediately shrunk markets for certain environmental technologies.

Execution Issues and a Shrinking Market

MPI's desire to exit the Farakka project stems from both the policy change and its own financial and operational weaknesses. The company's history of losses and negative net assets, coupled with delays in completing the Farakka project, raises questions about its ability to complete projects. This is worsened by the shrinking market for FGD installations. Much of the expected business is no longer profitable, hitting revenue for companies reliant on such mandates. While NTPC, with its substantial market value and strong finances, can handle such disputes well, the situation shows the potential impact on suppliers and contractors in a fast-changing regulatory environment. The dispute could also lead to penalties or long legal fights for MPI.

Outlook for Both Companies

For NTPC, the Farakka dispute is a manageable project issue amid its overall operational success. Analysts are very positive, with a 'Strong Buy' consensus and expect its stock price to rise. The company is focusing on meeting India's energy demands, backed by its strong finances and diverse energy sources. For Mitsubishi Power India, the future requires adapting to a market with less demand for FGD systems. It may need to shift focus to other power generation technologies or services where demand is strong and regulations are clearer. While the sector pushes towards cleaner energy, the FGD policy change has immediately shrunk markets for specific environmental technologies.