New Delhi: The government is working on a formula to compensate states for the environmental damage caused by power projects that sell power outside the states they are located in.
Precious supply: Miners at work at an SCCL mine in Godavarikhani in Andhra Pradesh. The power sector consumes 390mt of coal every year.
The compensation will be paid by the company, agency, or state buying power.
“We have realized that one-time compensation does not work. To take care of this, the compensation issue was discussed in the state chief minister’s meeting, in the meeting of state chief secretaries and even in the National Development Council. It has been decided that a formula will be devised by the Planning Commission to take care of this,” said a Union government official, who did not wish to be identified.
A Plan panel official confirmed this and and said that the country’s apex planning agency was presently working on a proposal.
Several state governments have been seeking such compensation and some of them proposed a cess that will be paid on every unit of electricity sold outside the state.
The compensation will be paid into an environment fund and disbursed to the states, said an official familiar with the developments, who did not wish to be identified said.
India has 256 billion tonnes of coal reserves of which around 455 million tonnes per annum (mtpa) are mined. The reserves are concentrated in the states of Jharkhand (28.95% of reserves), Orissa (24.60%), Chhattisgarh (16.2%), West Bengal (11.02%), Madhya Pradesh (7.92%), Andhra Pradesh (6.89%) and Maharashtra (3.76%).
Around 67% of India’s total power generation capacity of 140,000MW is based on coal and the power sector consumes 390mt of the fuel every year. Most of the thermal power generated by the plants located in these states is sold to the rest of the country. These states argue that they should be compensated for the environmental damage they incur.
Orissa, for instance, has been demanding a 6 paise cess on power. The state has emerged as the power generation hub of the country with 33,000MW of additional power expected to be generated in the state by 2012. Orissa has a demand of 2,600MW, expected to go up to 5,800MW by 2014.
“If the power project developers want to transfer the coal from states like ours and then use it for generation (in plants outside the states), they are more than welcome,” Suresh Mahapatra, Orissa energy secretary said. However, this could increase costs of power generation for power firms.
As will the cess or compensation, said an expert.
According to Dipesh Dipu , a manager at audit and consulting firm PricewaterhouseCoopers,“While the intent to provide for environmental damages by coal-based power generation may be applauded, but charging additionally from a consumer in different state does not appear equitable. The cost of energy may rise and thus have negative impact.”