Indian power firms seek billions for technology to cut emissions

The Indian government is being pressured by power companies to provide billions of dollars of funding to retrofit coal-fired plants to cut emissions, saying hefty tariff increases would otherwise be needed to pay for the technology.

Private companies such as Reliance Power, Adani Power and GMR and state-run NTPC, have also asked for an extension to a December deadline to meet new pollution standards.

The government, which has been pushing a clean energy campaign hard, has given no indication it would be willing to fork out the money for the new technology, which the private companies estimate to cost as much as $38bn (£29bn), potentially setting up a confrontation with the industry.

Thermal power companies account for 80 per cent of all industrial emissions of particulate matter, sulphur and nitrous oxides in India, and their slowness in complying with new standards shows the difficulties India faces in cleaning up its air, among the most polluted in the world.

The power producers, who account for the second-biggest portion of India’s $150bn in bad loans after the steel industry, have sought access to the more than $4bn National Clean Energy Fund to help install cleaner technology, according to letters to the government.

The upgrades are needed to meet stringent rules set out by the environment ministry in 2015 to cut emissions that cause lung diseases, acid rain and smog.

Top producer NTPC said in a letter dated 26 February 2016, that it needed about $8bn to upgrade equipment at its 28 coal-fired plants across the country to comply with the rules.

Installing the new technology would raise the cost of production and lead to an increase in tariffs ranging from about 0.50 Indian rupees (£0.006) to 1.25 rupees (£0.015) per unit, the Association of Power Producers, which is lobbying for the private firms, said in a letter to the government.

The average power tariff in India is around 5 rupees per unit.

“This increase in the cost of power would have severe impact on the finances of the distribution utilities and collateral impact on the lenders,” the association warned, referring to companies that buy power from producers and distribute it to industrial and domestic consumers.

One producer, Talwandi Sabo Power Limited (TSPL), said it had petitioned the regulator in the northern state of Punjab to pass on the costs of the equipment installation to the power purchaser, Punjab State Power Corporation.

Adani Power said it would implement emission-cutting equipment in accordance with schedule finalised by the government. All the other companies did not respond to Reuters questions.

Increasing power tariffs would reverse gains made by Prime Minister Narendra Modi’s government to reduce costs and spur economic growth, one of the achievements it has touted in its three years in power.

A source familiar with the discussions said there was no precedent for such federal funding for power firms. “Even if funding were to be given, it is difficult to decide how we allocate such funds,” the source said.

Around 78 per cent of generated power in India comes from coal-fired plants, making it one of the biggest users of the dirty but cheap fuel globally.

Coal-burning plants also contribute to particulate matter in the atmosphere that causes lung diseases.

While federal funding seems unlikely, the government could be more willing to consider an extension of the deadline for compliance with the regulations, officials say.

“We have referred to the Ministry of Environment pointing out the difficulties. It has been explained how much it will take to comply, including the technology issues,” Anil Kumar Bhalla, the top official at the power ministry, said.

Most power plants have yet to meet the new emission guidelines, the Central Electricity Authority said in May, suggesting the environment ministry extend the deadline on sulphur dioxide emissions standards by as many as six years.

In April a study found that India’s climate change commitments under the Paris Agreement will not be met if it goes ahead with the planned construction of nearly 370 coal-fired power plants. 

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