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Six states to unshackle captive power policies

Anil Sasi

Half a dozen states have conveyed to the Centre their decision to liberalise their captive power policies and allow the evacuation of excess power.

According to power ministry officials, Delhi, Karnataka, Punjab, Tamil Nadu, Kerala and Bihar have got back to the Centre after the latter's letter asking all states to facilitate setting up of captive power projects. Hitherto, such projects had to take the state electricity boards' approval under the Electricity Act.

Captive power projects hold a lot of potential, accounting for about one-fifth of the total installed capacity of about 103,000 MW.

Maharashtra and Madhya Pradesh have, however, not been quite receptive to the idea.

In Delhi, the regulator has proposed that private parties and residents' welfare associations be allowed to set up small power generating units to cater to their needs and draft regulations have been framed for grant of consent for setting up of captive plants. The notification is expected in May.

Karnataka and Bihar allow wheeling and banking facilities and also permit third-party sale of excess power. In Punjab, the state power board has allowed purchase and third-party sale, and offers wheeling of power at very low rates.

In Tamil Nadu, power is purchased by the state power board at competitive rates. The state, along with Kerala, offers banking facilities and wheeling of power at nominal rates, but neither allows third-party sale.

The least receptive to liberalising captive power policies include Madhya Pradesh and Maharashtra, which do not allow third-party sale, wheeling or banking of power.

The Maharshtra power board is also not willing to purchase excess power.

Similarly, Madhya Pradesh does not allow the state power board purchases, third-party sale or banking facilities. The state offers wheeling facilities at very high rates.

Many states discourage captive projects because the state power boards stand to lose. While some states allow captive power only for self-consumption, others allow excess power to be sold only to the state power boards.

With states getting ready to allow such projects, financing of captive projects has also started gaining ground.

Despite the restrictions, in the last two years, captive power growth at over 8 per cent rate, has been higher than the 5 per cent growth in total installed capacity.

The growth has been largely in the industrial sector on account of factors like lower cost of per unit power, convenience and reliability.

The Union power ministry in May, 2001 had called upon the states to evolve a mechanism for facilitating and enabling surplus captive power capacity to be brought into the grid to alleviate shortages in the short-term.

Under Section 44 of the Electricity (Supply) Act, 1948, establishment of a new generating station requires the state electricity board's consent. Captive power plants are governed by the provisions of Section 44.

Since the state power boards are empowered to give consent for establishment of captive plants, the power ministry has suggested that they could streamline the procedure further by laying down guidelines for the establishments to sell excess power to the grid. The ministry has suggested liberally permitting hydro or co-generation captive plants, irrespective of size, in its guidelines on captive power facilities.

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