New Delhi: The Planning Commission has recommended that the Indian Railways buy power from independent producers or get the private sector to set up power plants rather than rely on state electricity boards, according to railway and Planning Commission officials.
The railways’ power consumption is set to increase by 66% to 20 billion units by the end of the 12th Plan in 2017.
“It is a good idea and they seem amenable to it,” said a Planning Commission official, who did not want to be identified.
Growing demand: The railways currently utilizes 12 billion units of power annually. Its consumption is growing at an average of 5% every year. Rajkumar / Mint
The railways currently utilizes some 12 billion units of power annually and its consumption is growing at an average of 5% every year. It currently buys power from state electricity boards at an average of Rs4.29 a unit for running locomotives and Rs4.37 a unit for other purposes.
Railway officials said that with modernization, a dedicated freight corridor and electrification plans, the national transporter’s power requirement will increase exponentially.
“By buying from IPPs (independent power producers) they want to increase the investments in the power sector,” said a railway official on condition of anonymity.
The official said the railways, however, was concerned about the reliability and “power banking” facilities of independent power producers. “If we go for IPPs, they may not have power all the time.”
Going to state electricity boards also drives up the cost of power for the railways because these boards typically subsidize their retail customers by charging extra from commercial ones, such as the railways. This “cost-subsidy” surcharge could be as much as Rs2 over what is charged from regular customers.
According to Kameswara Rao, leader power practice, at consultancy and audit firm PricewaterhouseCooper India, there are both advantages and disadvantages in the railways opting for the Planning Commission’s suggestion.
“Effectively, railways pay high tariff of Rs5 plus by buying power from state electricity boards. It can save almost half the amount that goes for paying for power by going in for joint venture or its own power generation because of competitive bidding,” Rao said.
“However, railways have hundreds of transit points and there will be huge outgo to state utilities on account transmission and distribution charges besides connection and standby charges. These together will pose a burden on the railways,” he added.
Planning Commission officials said the railways had been trying to revive an old power plant in Thane, Maharashtra, and set up a power plant along with NTPC Ltd, the country’s biggest power producer, in Navi Nagar in Bihar.
“We have been hearing of Navi Nagar for the last six-seven years. When they told us of their plan to set up captive plants, the Planning Commission told them to check (the feasibility of inviting private sector). That way they will be able to add a lot more capacity,” said another Planning Commission official, who also did not want to be named.