The power sector CPSEs have been directed to work on setting up thermal power plants (TPPs) near coal mines as well as strategise with Indian Railways to invest in coal logistics initiatives to prepare for meeting India’s rising power demand, which is growing at six to seven per cent per annum.

The directions form part of an action plan, which has been prepared after a meeting was held in the Prime Minister’s Office (PMO) in June last year to review the preparedness and devise a strategy to meet the growing power demand in India.

Considering the growing appetite for electricity both from the commercial and industrial (C&I) sector and households with peak power demand expected to rise to 366 gigawatts (GW) by 2032, from 243 GW in 2023, the centre has planned to add a total of 80 GW of thermal capacity by FY32.

Around 25-30 GW of TPP capacity is under construction, while another 50-55 GW needs to be added. This becomes critical, as more firm power is needed to balance the growing penetration of renewable energy to maintain integrity of the power transmission network, besides meeting the country’s growing electricity demand.

According to JM Financial, around 2,754 megawatt (MW) of thermal capacity was added during April-December FY24. A total of 6-8 GW capacity is expected to be commissioned by March 2024.

More thermal power

Power Ministry made a presentation in the PMO on the sectoral review of the power sector. Besides Power Minister R K Singh and Power Secretary Alok Kumar, the meeting was attended by Principal Secretary to PM, Adviser to PM, Cabinet Secretary, NITI Aayog CEO and Finance Secretary.

Accordingly, a set of actionable inputs were decided which included setting up TPPS news coal mine pit heads, investing in coal logistics and fast tracking the installation of smart meters.

It was decided that all upcoming thermal power capacity should be set up close to the sources of coal. It was also decided that states that are setting up generation units away from coal mines should be “immediately reviewed”.

The need to put the awarding of planned TPPs under mission mode was underscored, while it was also emphasised that these TPPs should be prioritised to be established near coal mines.

Power sector CPSEs should also invest in development of coal transportations logistics and arrangements may be made with Railways for appropriate rebate in freight to such CPSEs on this account.

In this context, the Coal Ministry is already working with Railways for setting up 35 important rail lines that are crucial for the evacuation of coal from Odisha, Jharkhand and Chhattisgarh. It was not immediately clear whether Power sector CPSEs will be investing in these key projects.

Strengthening the sector

The meeting also deliberated on the financial viability of the sector and the efforts required to further strengthen it. Accordingly, it was decided that per capita consumption of electricity should be computed for states based on electricity supplied to household category consumers.

Furthermore, an assessment of the current trend of billing efficiency and collection efficiency should be done for the states and based on that and an action plan should be implemented to achieve targeted loss reduction in a mission mode.

The meeting also deliberated on the status of the smart metering projects under the revamped distribution sector scheme (RDSS). It was decided that smart meter projects need to be fast tracked, particularly in areas of poor collection efficiency (electricity bills).

The exposure of state-owned power sector lenders, PFC and REC, was also taken up. It was decided that exposure of PFC and REC in state-run power utilities should be carefully monitored continuously in order to avoid any systematic risk to these NBFCs on account of weak financial position of some of the state owned utilities.