Captive Generating Units May Get To Sell Power

A change in the definition of a "captive generating plant" in the Electricity Bill, 2003, will allow these plants to sell power commercially, bypassing state electricity boards.

Large users of power like industrial units are now charged a higher tariff, which is used to cross-subsidise other users.

The Bill stipulates that if large users choose to bypass state electricity boards and buy power from other suppliers, they will have to pay a surcharge. This surcharge will allow the boards to subsidise other customers like households and farmers.

However, Section 42 (2) of the Bill, which talks of levying a surcharge to "meet the requirements of the current level of cross-subsidy", says "such surcharge shall not be leviable (for) captive generating plants".

Power Secretary R V Shahi denied this, and said even captive users would have to pay a surcharge if they went through the grid. Shahi's interpretation, however, is not what the Bill says.

Congress MP Kapil Sibal, who moved an amendment in the Rajya Sabha on the matter today, said, "Eventually, the Bill is going to govern matters, which will allow captive generators to sell power without paying a surcharge."

The key here is the change in the definition of a "captive generating plant". Under the current law, a "captive generating plant means a power plant set up by any person to generate electricity primarily for his own use".

The Electricity Bill has changed this to add "... and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association".

So, if a power generating company wants to sell power directly to large users, say, a cluster of industries or a township, all it has to do is to register these users as part of a co-operative society or even as just as an association of persons.

The power plant is now a captive generating plant, and there can be a separate clause specifying the charges to be paid.