FICCI has written to the the Prime Minister’s Office (PMO) to set up a committee to extend the timelines for Flue Gas Desulphurisation (FGD) implementation, as a majority of them are not likely to meet their deadlines.

An immediate time extension may be granted for installation and commissioning of FGDs by central power plants, who may be exempted against any adverse action for non-compliance of the new emission norms in view of the June 30 deadline, FICCI said in the letter. The industry body has sought a committee comprising the Power ministry and Ministry of Environment Forest and Climate Change (MoEFCC), to look into this matter.

Implementation of FGD systems are mandatory as the Ministry of Environment Forest and Climate Change (MoEFCC) notification to curb SOx emissions in both existing and upcoming thermal power plants.

However, implementation of FGD systems in Thermal Power Plants (TPPs) have got disrupted as India relies on import of components from China.

Extension of deadline

“It is pertinent to note that about 30 months are required to achieve commissioning of FGD after having regulatory and financing clarity,” noted FICCI. According to data by Central Electricity Authority (CEA) for all the power plants, Central, State and Independent Power Producers (IPPs) pointed out that most of the plants would not be able to meet the deadline despite advance efforts having been taken by many of them.

In this context, the FGD sourcing and supply capacity becomes a critical issue. “Major suppliers of FGD equipment are from outside India. In this context, the Ministry of Power (MoP) order requiring prior approval of import of equipment from certain countries, presents an opportunity to manufacture in India and contribute to the ‘Aatmanirbhar Bharat’ objective and also create additional jobs. However, as a result, it would take time for Indian manufacturers to ramp up capacity, as well as for IPPs and CPPs to redo the process of tendering and supplier finalisation,” stated FICCI.

FGD implementations are under severe stress. According to data from Central Electricity Authority (CEA), around 341 out of a total of 441 TPPs have not yet awarded tenders for implementation. Further, the target for FGD commissioning was 37.61 GW by end of December 2020. Of this, only 1.7 GW of TPPs have met their target and around 36 GW of TPPs will miss their deadline, according to industry watchers.

Additionally, severe regulatory and financing bottlenecks to implementation persist, and this has impacted FGD implementation timelines. The most critical ones include regulatory clarity, Return on Equity (RoE); and compensation mechanism for non-contracted plants.

While the MoP has issued directions to treat the requirement of installation of FGD as change in law, and CERC has passed orders in case of individual petitions approving change in law in principle, these orders are being challenged by discoms. “Without confirmation from discoms, financing institutions are unwilling to finance FGDs in view of uncertainty about cost recovery,” said FICCI. In case of RoE, CERC’s tariff regulation provides for RoE equal to cost of debt. The industry is of the view that it would be impossible to get equity at prevailing interest rates for debt, and is tantamount to an unwarranted penalty on investors who have invested thousands of crores of equity.

Furthermore, for non-contracted plants, many of which are under financial stress, deliberations have still not been concluded regarding how they would be compensated for the FGD costs, noted FICCI.