NOC entitles transporter to waiver from cross-subsidy surcharge
Despite obtaining a ‘deemed licensee’ status for power distribution from the government, the Indian Railways is yet to fully utilise the facility to save on its energy cost as some states namely Uttar Pradesh, Chhattisgarh, Bihar, West Bengal and Odisha continue to delay issuance of the no-objection certificate (NOC) which would have entitled the transporter to a waiver from the cross-subsidy surcharge.
Consumers in any state require to pay a hefty cross subsidy-surcharge (CSS) if they procure power from any source other than the state-owned discom, with a deemed licensee being an exception. Once NOCs from all the states are in place, the railways can directly buy power from independent power producers without attracting the CSS, which will reduce its energy cost by as much as 40%.
Although the delays in issuance of NOCs could affect the transporter’s plan to save Rs 3,000 crore annually on its traction bill, officials at Railway Energy Management Corporation (REMCL) say the deadlock will be resolved by this year and it will not have a significant impact on its saving targets.
REMCL is a joint venture between Indian Railways and RITES with an equity participation of 49% and 51%, respectively. It mainly deals with procuring power for the transporter. REMCL is also working toward harnessing 1,000 MW of solar energy by 2020.
“We are migrating to the competitive bidding route for power procurement in a phased manner. We have been premium customers of various states, we had predicted that there would be some opposition and delay from states as they would not want to lose out on a bulk customer. But the issue will be resolved soon. We are procuring power from IPPs only in states which have not given the NoC that we are partly buying power from their state discoms,” an official at REMCL said, requesting anonymity.
Till the last year, the railways was completely dependent on state discoms for its traction needs. However, with states imposing industrial rates of electricity for the transporter, it began contracting power directly from power developers from last year. The railways has so far contracted 1,500 MW under the competitive bidding route, where it discovered tariff 30-40% lower than charged by state discoms. With this move, Indian Railways hopes to reduce its current traction bill to Rs 8,900 crore in FY17 from Rs 10,200 crore in FY16.
Additionally, Indian Railways has also started constructing its own transmission lines which it intends to connect directly with the central grid. This will insulate railways from compensating states for technical and commercial losses they suffer due to poor infrastructure and inefficient billing when they are connected to the state grid. For example, states such as Bihar, Uttar Pradesh and Haryana have transmission and commercial losses of nearly 40%, which is a burden for all the consumers of the discom including Railways.
The transporter has already created its own transmission lines which are connected to the central grid on the Delhi-Kanpur and Kanpur Allahabad region. It endeavours to connect the whole golden quadrilateral route as well as the railways’ entire network with the central grid. The transporter also intends to procure 2-5 % of its energy requirement through spot buying.
The transporter with an average annual energy requirement of 2,000 MW will witness a complete shift in its power procurement policy with the commencement of production from its own captive power plant in Nabinagar (1,000 MW). The coal-based power plant will start producing 1000 MW in four phases starting from 250 MW in September this year and will reach its full capacity by March 2018. The transporter intends to utilise 900 MW for its own purposes and 100 MW will be given to Bihar.