Numerous states have insisted that the capital expenditure on this account must not be considered as loans but be passed on as grants

New Delhi: States are looking to access the Centre-run Power System Development Fund and the National Clean Energy Fund to meet the extra expenses needed to adhere to the environmental standards for thermal power plants. Numerous states have insisted that the capital expenditure on this account must not be considered as loans but be passed on as grants, sources say.

The issues were brought up at the conference of power ministers of states held at Gurgaon recently. Power generation capacity of 1,61,402 megawatt (MW) would have to install flue gas de-sulphurisation (FGD) units and 64,525 MW capacity will need to be upgraded with electrostatic precipitators to reduce emissions, as per the ministry of environment and forests' (MoEF) mandate.

The estimated capex to install the emission reducing equipment are ranging between Rs 88 lakh to Rs 128 lakh for every MW. This might possibly increase the power tariffs by Rs 0.62-0.93/unit. Around Rs 3.5/unit is the average rate at which power distribution companies (discoms) purchase power.

Power departments wary of any rise in power cuts

The state power departments would be cautious of any rise in power costs, with financial losses of the discoms under the UDAY scheme growing 36 percent year-on-year to Rs 15,080 crore in the first half of this financial year.

Private power generators, reeling under stressed assets of close to Rs 2 lakh crore already, had already flagged the concern last year, insisting that the power ministry choose REC and PFC as nodal financing institutions for pollution control equipment.

"With high exposure and large number of projects on watch list, no bank is willing to lend more money to developers," Ashok Khurana, director-general, association of power producers, had recently said.