NTPC may get to sell 50% of output to home states

NTPC may soon get to allocate up to 50% of the output from its new plants to the home state, allowing it to compete with private developers. Private sector power project developers have snatched away a number projects from the largest power producer by offering a higher share of output to the state where the project is located.

The power ministry is finalising a note for the Cabinet to implement the proposal. “Once approved, it would give a boost to the power PSU’s plan to implement a host of greenfield projects on its own or under joint venture with state utilities,” said a government official privy to the development.

NTPC is allowed to offer up to 30% to power from a project to the home state. This includes the 10% that a power company has to give to home state under the existing formula on allocation of power from central sector utilities. This contrasts with private sector power projects such as Reliance Power’s Sasan, Krishnapatnam ultra mega power projects (UMPP) and Tata Power’s Mundra project where share of allocation to home state has been 37.5%, 40% and 47.5%, respectively. “The move will also help NTPC to secure cooperation from states in land acquisition, water linkage and other statutory clearances facilitating faster development of projects,” the official said.

The coal-rich states have been demanding higher allocation and other benefits from prospective project developers. Some states have even blocked PSU’s projects demanding higher share in power allocation, power at variable charge and a share in profits.

“The proposal (higher allocation of power) will not make it mandatory for NTPC to give 50% of share in power to home state. The allocation could vary depending on peak shortage in state and its other immediate needs,” a power ministry official said. Power generated at NTPC plants is allocated to different beneficiary states in accordance with the Gadgil formula. As per the formula, the home state gets 10% as preferential allocation, 15% is kept unallocated at the disposal of the Centre and the balance 75% is allocated to beneficiary states, including the home state, on the basis of their energy consumption and central plan allocation during the previous five years. Under the changed formula, NTPC could give up to 50% to home state, reserve 15% as unallocated quota of the Centre and commit the remaining 35% of power to the region or states close to the project site.

NTPC’s current generation capacity is just over 31,000 mw and it is implementing projects of another 18,000 mw for commissioning during the Eleventh Plan ending March 31, 2012. Earlier, NTPC chairman and managing director R S Sharma had written to the power secretary to change the allocation formula for the PSU to provide it a level playing field with other developers. The PSU has sought the government’s permission to allocate 40-45% power to home states during peak demand shortages. It has said additional allocation could be given from 15% power that could be set aside by the PSU in all future projects.