Given a host of challenges, the government’s 2022 deadline for installation of FGD units at 166 GW coal-based capacities is likely to be missed
The agenda for installing pollution reducing equipment at coal-based power plants, already facing challenges, has to reckon with an apparent disruption of the supply chain following the ban on import of power equipment from China. Taken together with the reluctance of lenders to inject more capital in the stress-ridden sector and the uncertainty over its impact on power tariffs, this means the Centre’s 2022 deadline for installing flue gas de-sulphurisation (FGD) units in plants with a capacity of 1,65,942 MW is likely to be missed.
In fact, about 75% of these plants are yet to award contracts for the purpose though it takes about 30 months to commission such a project, which reduces sulphur dioxide emissions. About 14,000-MW capacity power plants around the NCR have already missed the first deadline of December, 2019. As per the mandate, 22,310-MW power capacities are required to set up FGD units in 2020, 62,297-MW, in 2021, and 65,455-MW, in 2022.
Industry associations have requested the Prime Minister’s Office to constitute a committee to review the timelines, after assessing the requirements and the bottlenecks. The Supreme Court recently refused to allow a blanket extension of deadlines for FGD installation to power plants undergoing the corporate insolvency process.
Lack of clarity on the tariff hikes which would be allowed in lieu of equipment installation is another hurdle. While the power ministry has clarified that FGD installation would be treated under the ‘change in law’ provision, implying the expenses would be passed on, discoms are challenging the tariff hikes approved by the Central Electricity Regulatory Commission (CERC). “Without confirmation from discoms, financing institutions are unwilling to finance FGDs, as there is uncertainty over cost recovery,” says Vipul Tuli, chairman of FICCI Power Committee.
As per initial estimates, the cost of FGD installation is Rs 27-45 lakh per MW, and would necessitate a rise of Rs 0.62-0.93/unit in power tariff. However, several power plants have pointed out to the CERC that the actual costs are higher. CLP India’s 1,320 MW Jhajjar power plant, a unit of the Hong Kong-based CLP Holdings, is currently the only private station to have commissioned such equipment.
The ban on Chinese equipment is also delaying the FGD tendering process, as even local companies manufacturing the machines are dependent on imports. According to sources, about 30% of FGD components have to be imported, with most of these coming from China. “A shift of 2-3 years in timelines would provide an opportunity to implement the ‘Atmanirbhar Bharat’ agenda by creating an order book of about Rs 48,000 crore for the domestic industry,” says Ashok Khurana, director general of the Association of Power Producers.
There are also activists who believe that spending on costly FGDs would add to environmental problems. To curb sulpur dioxide emissions, FGD units would end up producing a similar quantity of carbon dioxide and also lead to an increase in mining activity, as limestone is required to run the units, they say. Seeking a review of the plan, the Veterans Forum for Transparency in Public Life has pointed out to the National Green Tribunal (NGT) that these units would also produce more than 10 MT of chemical gypsum, the disposal of which would be an added burden for power plants. The NGT has asked the NGO to approach the Central Pollution Control Board (CPCB) with its plea.
While the CPCB has imposed a fine on power plants not complying with FGD deadlines, some industry watchers feel the penalties, in the range of 0.12-3.28% of the energy cost of plants, are not a significant deterrent. “The penalty is notional at best,” says Karthik Ganesan, fellow at the Council on Energy Environment and Water. “Until there is a clear directive from the Centre, power producers are unlikely to take the issue of compliance seriously,” he feels.