Odisha to discourage IPPs to convert into CPPs

State energy department argues that conversion from IPP to CPP will deprive state of firm commitment of power supply

The Odisha government has decided to discourage Independent Power Producers (IPPs) to convert the status of their power projects into captive power plants (CPPs).

The state energy department argued that conversion from IPP to CPP will deprive the state of a firm commitment of power supply and also loss to the environment management fund managed by the forest department. The fund mandates the IPPs to contribute six paise for every unit of power sold outside the state but the same stipulation does not apply to CPPs.

“In the draft comprehensive thermal power policy, we have discouraged conversion of IPP to CPP since it means loss in availability of firm power commitment ensured by the IPPs. Besides, the state will also be deprived of a green cess imposed on IPPs for power sold outside the state and also loss in electricity duty since CPPs currently enjoy exemption in duty as per the state Industrial Policy Resolution (IPR),” said an official source.

The policy is however okay with conversion from CPP to IPP but any such conversion will require the prior approval of the Coal ministry.

According to the draft policy, the state government will have the first right of refusal for CPPs to sell their surplus power after meeting their captive requirement.

On the issue of free power, the state government is awaiting the final report from The Energy Resources Institute (Teri).

The Planning Commission had urged Teri to conduct a study on free power after Odisha and some other coal bearing states pitched for free power from coal-based power plants.

It may be noted that Odisha had demanded 25 per cent free power from coal-based power plants and 33 per cent free power from power plants based on coal washery rejects. Later, the state government is understood to have scaled down its power demand from plants based on washery rejects to 13 per cent in line with the provision for free power guaranteed under National Hydro Policy.

But the demand for free power was stiffly opposed by the IPPs who argued that the condition of supply of free power will make the power projects unviable.

A team of Teri had recently visited Odisha for a study on equitable sharing of benefits arising from coal mining and power generation amongst resource rich states. The objective of the study was also to examine the impact of allowing free power at variable cost from coal based power plants in the host state.

In its preliminary report, Teri had recommended a cess on coal production and also an environment and social cess on coal based power generation keeping in view the negative externalities arising out of coal mining.