Odisha risks losing low-cost power after thermal policy amendment

Odisha's move to cut low-cost power entitlement from future private thermal projects has drawn criticism from experts over long-term energy security risks

The Odisha government’s decision to reduce the state’s entitlement to low-cost electricity from upcoming Independent Power Producer (IPP) thermal projects has sparked a debate in the energy sector, with experts alleging that the decision favours private players at the cost of the state’s long-term energy security and public interest.

 

The State Cabinet chaired by Chief Minister Mohan Charan Majhi on Wednesday evening approved amendments to the Odisha Thermal Power Policy, 2008, in a move aimed at attracting fresh investments into the power sector. Once the policy is amended, the state’s right to procure electricity from upcoming private thermal power plants at variable cost will be reduced from the existing 12-14 per cent to only 5 per cent.

 

As the state government projected the decision as an investor-friendly reform designed to make Odisha more attractive for large thermal power investments, officials argued that the earlier provision had become commercially unattractive for thermal power producers and was creating hurdles in securing investments and financial closure for projects.

 

However, power sector experts and analysts have strongly criticised the amendment, terming it a “direct loss” for Odisha because the state will now lose access to a substantial share of the cheapest electricity generated within its own territory.

 

“The state cabinet's approval of the amendment proposal to the Odisha Thermal Power Policy is an act against the state's interest,” power analyst Anand Mohapatra said. According to the earlier provision, 12 per cent to 14 per cent of the total generation from IPP thermal plants was available to GRIDCO Limited at variable cost, which effectively meant power at almost half the normal price. This was among the cheapest electricity available to Odisha, he said.

 

Analysts said variable-cost power excludes fixed charges and capital recovery components and remains significantly cheaper than market-linked electricity procurement. Odisha effectively loses between 7 per cent and 9 per cent of its assured low-cost electricity from future projects by reducing the entitlement to 5 per cent.

 

“This is not a minor amendment. It has serious long-term financial implications,” another energy expert said. “When demand rises in future, Odisha may have to buy electricity from exchanges or external sources at much higher tariffs, despite hosting coal mines and thermal plants within the state,” he pointed out.

 

Odisha provides key resources such as coal mines, water and land to private developers at concessional rates to facilitate the establishment of thermal plants. It also bears the environmental and social burden of thermal power generation.

 

“The irony is that Odisha gives everything — coal blocks, water resources and forest land — to private companies at cheap rates. In return, the state suffers pollution and ecological damage. Thermal power ash has already become a major problem in the state,” Mohapatra said.

 

Several industrial regions including Angul, Talcher and Jharsuguda have repeatedly faced complaints regarding fly ash pollution, groundwater contamination and deteriorating air quality due to concentrated thermal and mining activities.

 

“Even the earlier 12-14 per cent cheap power allocation was considered insufficient and many believed it should have been increased considering Odisha’s contribution to India’s energy economy. Instead, the state has now reduced it to just 5 per cent. That is both concerning and ironic,” he added.

 

The amendment comes at a time when Odisha’s industrial growth trajectory is expected to significantly increase electricity demand over the next decade, particularly from steel, aluminium, green hydrogen and manufacturing sectors. The state possesses vast coal reserves and has emerged as a preferred destination for mineral-based industries that require uninterrupted power supply.

 

Experts also cautioned that the reduction in low-cost power entitlement may eventually impact consumers and industries within Odisha if future electricity procurement becomes costlier. Odisha has traditionally maintained a power-surplus position and played a critical role in eastern India’s energy supply chain.

 

A GRIDCO official admitted that there will be losses for the state if no significant investments come in the next few years. “The amended policy will be applicable to upcoming thermal power producers and the earlier provision of 12 to 14 per cent of the total generation will remain unchanged for the existing producers,” he clarified.

 

Even as investors are more keen on the renewable energy segment owing to environmental concerns, energy department officials defended the decision by arguing that competitive market realities have changed substantially since the Odisha Thermal Power Policy was framed in 2008.

 

“The mandatory allocation of 12-14 per cent power at variable cost was increasingly being viewed by investors as financially unviable. The revised framework is intended to balance investor confidence with the state’s developmental priorities while accelerating capacity addition in the power sector,” they said.

 

Officials also stressed that Odisha will continue to derive indirect economic benefits through industrialisation, employment generation, infrastructure growth, royalty revenues from coal mining and increased investments linked to thermal projects.

 

“The state’s objective is to create an enabling environment for investment while ensuring long-term power availability,” an official said. “If projects do not come up because of restrictive conditions, the state ultimately loses investment opportunities, jobs and economic activity,” he added.