Protectionist measures by coal-bearing States such as Chhattisgarh and Orissa threaten to further worsen the already dismal coal availability situation for the power sector.
Resource-rich States are vying to corner cheaper electricity supplies from generation projects coming up within their boundaries. This move could result in consumers in other parts of the country being forced to shell out higher tariffs for electricity.
Taking a grim view of the benefits being sought by resource-rich States from thermal power project developers, the apex electricity regulator has sought the Union Government's intervention in ironing out these market distortions that function as non-tariff barriers, which effectively disincentivise power exports outside the home state. Especially as pit-head based power generation capacities are located entirely in these coal-rich States.
In Orissa, for instance, private project developers that have been allocated coal blocks within the State have been asked to make a specified volume of generated power, ranging from 7 per cent to 12 per cent, available at variable cost to the home State. This means the fixed cost for this power would be loaded on to the consumers in other States, who would thereby have to pay higher for electricity. Besides this, Orissa has mandated an annual contribution of 6 paise per unit of the energy generated from stations in the State that sell power outside Orissa towards an Environment Management Fund.
Coal-rich Chhattisgarh too, in its recent Energy Policy, has mandated that surplus power from generators could be sold to other States only “after meeting the requirement” of Chhattisgarh. Under the provisions of the Policy, sale of electricity to other States has to be mandatorily routed through the Chhattisgarh State Electricity Board, even though the developer has been given the responsibility to identify buyers outside of the State. A similar norm has been provided in respect of sale of surplus power from a captive unit.
Apart from Chhattisgarh and Orissa, states such as Punjab and Uttar Pradesh are among those setting up barriers to flow of electricity outside their State boundaries. This has been specifically cited as practices by State Government that could cause “problems on policy and regulatory fronts.” The apex electricity regulator or the CERC, in a missive to the Centre, has taken a serious view of the various instances of barriers to free flow of power and has said that “ideally, the State Governments should not intervene in power procurement and trading of electricity, which is the obligation of the distribution licensees (utilities).” The suggested course of action includes firming up a uniform policy that addresses adequacy of royalty on the mining of coal, on the lines of the free power to hydro States. Evolving a national policy on appropriately compensating the project-effected families and local areas where the power projects are being set up has been mooted.