The Hindu Business Line : Eco cess — Orissa, power producers at loggerheads

The scenario
Orissa, which has a surplus power situation currently, has a queue of power producers lining up to set up projects there.
The State feels it is very much in order to demand an environmental charge, since deforestation and burning of coal will take place within the State to create power that will mostly be moved to other States.

Mumbai , June 4

A backstage tug of war is brewing between the Orissa Government and private power producers over an environmental cess that the State wants to levy on coal-based power projects.

Private power producers, some of whom have been sounded out on the levy, are trying their best to prevail upon the Centre to thwart the cess.

Orissa, which has a surplus power situation currently, has a queue of power producers lining up to set up projects there, the State's abundant coal availability being the chief attraction.

The State feels it is very much in order to demand an environmental charge, since deforestation and burning of coal will take place within the State to create power that will mostly be moved to other States, said a senior official with the State Government. "It is still a concept, and we are discussing this with all the parties concerned," said the official.

The cess collections will go into an environmental management or development fund, he said.

There are different ways in which such a cess can be levied. One is to charge a few paise on every unit of power which will be sold outside the State; the other is to charge a certain amount (some industry sources say Rs 4 crore) for every 100 MW of capacity established.

The Orissa Chief Minister is believed to have discussed the demand of the State Government for revenue compensation on coal-based power generation with the Planning Commission as well as the Power Ministry.

The compensation, it was felt, could be achieved through a certain percentage of free power as in the case of hydro power where 12 per cent of the power generated is given free of cost to the host State, or by way of imposition of environmental cess. The appeal for this concessional power has already been nipped in the bud by the Centre following pressure from private power producers.

"We have only heard about a possible cess," said Mr V. Sethuraman, Director, Power, Neyveli Lignite Corporation Ltd, which has plans for a 2000-MW project in Orissa, and which could be outside the ambit of the cess if it is levied only on private projects. "Its impact will ultimately push up electricity tariff for the end consumer; we understand that this issue is being taken up by the Centre."

While taxes on power are a State subject, States can be persuaded one way or the other, and some of these decisions are influenced by Chief Ministers' meetings with the Power Ministry, said an official with the Independent Power Producers Association of India.

Some private power producers feel such a cess could also be discriminatory, making it difficult for private producers to sell power produced in Orissa to outside States, while State-owned entities, if exempted from the cess, will earn a lot of money selling power to other States, Orissa being a power-surplus State.

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