Shutting down old coal power plants in 11 states will save Rs 53,000 cr: Report

  • The savings will come from not having to spend on retrofitting these plants to reduce the toxicity of their emissions, and switching to greener sources of energy, the report said

  • There could be “short-term pain,” the authors warned, from shutting down plants, but they will be offset by long-term benefits

New Delhi: Closing down coal power plants older than 20 years in 11 key states will save the exchequer Rs 53,000 crore, an analysis by a think tank has claimed. According to Climate Research Horizon, the savings will come from not having to spend on retrofitting these plants to reduce the toxicity of their emissions, and switching to greener sources of energy. In her Union Budget speech earlier this year, Union Finance Minister Nirmala Sitharaman had announced that utilities would be urged to shut down old and polluting power plants to meet air emission norms.

The 11 states that were analysed by the think tank were Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal. Together, they account for nearly half of discom dues.

‘States have installed capacity in excess of actual requirements’

While pointing out that even though India is a power-surplus nation, the authors of the report pointed out that the power sector is stressed because of financially distressed power distribution companies (discoms). While free power for agriculture and power theft are one of the reasons, the authors opined that another reason is that several states have installed capacity based on projections that are far in excess of actual requirements.

“This has resulted in huge over capacity in the electricity system, and disproportionate fixed cost obligations for many discoms. In conjunction with delayed payments from cash-strapped government entities and the requirement to provide free and subsidised power to significant segments of their customer base, this has been a recipe for disaster,” author Ashish Fernandes, CEO and Lead Analyst, CRH, and Harshit Sharma, Lead Researcher said.

Also read: Coal linkage rationalisation: WCL offers 20-25 MT of cheaper coal to state gencos, NTPC, IPPs

The surplus generation capacity notwithstanding, an additional 60,000 MW thermal power is officially under construction across the country, with another 29,000 MW in the proposal/permitting stage. Of this, 17,235 MW is likely to be completed by 2022 in these states.

‘Shutting down coal plants will cause short-term pain but accrue long-term benefits’

The average cost of coal-fired projects is Rs 4 per unit and generally sees an upward escalation whereas new solar power plants are being bid out at less than Rs 3 per unit, again, a reason, the authors said, for states and private players to exit coal plants.

There could be “short-term pain,” the authors warned, from shutting down plants. Such pain incurred from these measures is like some lenders having to forego income from outstanding loans due to the renegotiation of fixed costs, or government-owned generators having to shutter a plant earlier than expected. “This however should be viewed against the significant savings that will accrue to discoms and consumers,” the report said.

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