The delay on State governments’ part in giving no-objection certificates (NOCs) to Independent Power Producers (IIPs) for wheeling the electricity is preventing the Railways from procuring cheaper power.

States such as Odisha, Bihar, Uttar Pradesh, Haryana, Punjab, Delhi, Rajasthan, Chhattisgarh and West Bengal are holding back in order to protect their already stressed distribution utilities, as the cost of power being sold by the IIPs is almost 50 per cent cheaper than that of State Electricity Boards.

For instance, Jindal Power is ready to offer 585 mega watt (MW) electricity at ₹3.69 a unit to the Railways, which will result in savings of ₹1,100 crore annually. Jindal Power’s rates are almost 40 per cent lower than what Railways would have had to pay if it sourced electricity from the State distribution utilities of Odisha, Bihar, Uttar Pradesh, Haryana, Punjab, Delhi, Rajasthan, Chhattisgarh and West Bengal, where the average tariff for sale is around ₹6.3 a unit.

The Railways sources electricity for traction at an average rate of ₹6.7 a unit. To source electricity directly, the Railways needs NOCs from the State Electricity Boards. 

The Railways consumes 2,100 MW for traction and 400 MW for non-traction purpose. Its electricity bill runs up to ₹12,000 crore a year. “We are hoping to get the NOCs from these States,” a Railway Ministry source told BusinessLine

It has tied up with PTC India, GMR, Tangedco – the State electricity utility in Tamil Nadu – Telangana and Andhra Pradesh, to source electricity at ₹4.9 a unit against ₹6.5 a unit earlier. The Railways has also tied up with PTC to source electricity at ₹5.5 a unit in Tamil Nadu, for which the State government has already given the approval. Similarly, it will source 50 MW from Telangana at ₹4.91 a unit. From Andhra Pradesh, it will source 200 MW from the State power generation utilities.

Sourcing power from Ratnagiri Gas and Power Private Ltd has already saved the Railways ₹1,300 crore during November-March 2015-16. This will translate into savings of ₹3,000 crore a year as the average rate per unit has come down to ₹4.61 from ₹7.07. This has helped meet the Railways’ power requirement in Maharashtra, Gujarat, Madhya Pradesh and Jharkhand; apart from partial requirement in Uttar Pradesh.

The Nabinagar power plant, a joint venture between the Railways and NTPC, is expected to start generating electricity by September this year. An NOC from the West Bengal government is required to ensure wheeling not just to West Bengal, but to other States as well. This will help lower the per-unit tariff to ₹4.4 from ₹7.3.

“We should be able to save ₹5,000 crore a year if all these approvals are in place,” said the source.

The Railways’ efforts to cut costs on electricity have seen a greater push after it got a deemed distribution licence in 2014. Before this, like any other major consumer, the Railways had to use the Open Access route if it wanted to source electricity directly from power generators.

Under the Open Access mechanism, consumers connected to a load of over 1 MW can purchase power directly from power generators. However, the mechanism has not taken off as States enforced additional levies on Open Access electricity purchases to protect their electricity distribution utilities from losing consumers. Till date, there are only 3,000 Open Access consumers, according to data from the Central Electricity Regulatory Commission.

In States like Maharashtra, the duty is as high as 9 per cent, which becomes a deterrent for Open Access consumers.

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