States warming up to railways’ plan to procure cheap power from private generators

Following the nod given by the Central Electricity Regulatory Commission (CERC) to the Indian Railways to procure electricity directly from the generator of its choice, the national carrier has received a go ahead from the Rajasthan government for accessing its transmission lines.

The railways, with an annual electricity bill of around Rs.12,000 crore, is looking to save at least Rs.3,000 crore by procuring electricity directly from power producers rather than buying from the state electricity boards.

“Following Gujarat, Maharashtra, Jharkhand and Madhya Pradesh, Rajasthan has also come on board around 15 days back and we are about to finalise Orissa as well..Talks with other states are going on and the response is quite encouraging. Issues such as transmission, capacity and necessary metering are under discussion,” said a spokesperson for the ministry of railways. 

The national carrier aims to procure power through bidding process at economical tariff from generating companies, power exchanges, and bilateral arrangements. It procured the deemed distribution licence status under the Electricity Act, 2003 in November 2015 leading to it being treated at par with distribution companies.

On 17 July, newspaper Hindu Business Line reported the delay on state governments’ part in giving no-objection certificates (NOCs) to independent power producers (IIPs) for wheeling electricity was preventing the railways from procuring cheaper power.

According to a note issued by the ministry of railways titled ‘New Paradigm of Electric Power Procurement’, the Indian Railways contracted for about 500 megawatt (MW) power from Ratnagiri Gas Power Pvt. Ltd for consuming it in states of Maharashtra, Gujarat, Madhya Pradesh and Jharkhand at about Rs.4.70 per unit.

It further got 200MW power from 47 traction sub-stations (TSS) in Maharashtra starting 26 November last year. In addition, railways, through its company Railway Energy Management Co. Ltd, contracted 50MW power through open tendering system at Rs.3.69 per unit in its central transmission utility-connected network from Dadri to Kanpur in Uttar Pradesh. This 50MW power flow started 1 December 2015.

In the railway budget speech for the current financial year, Prabhu announced power procurement contracts already signed and implemented would lead to an annualised saving of Rs.1,300 crore. It was also estimated that actions to source power will deliver annualised savings of Rs.1,700 crore during the coming year.

According to experts states should not act as a hurdle for the Indian railways in its quest of saving cost of procuring power.

“Any consumer should be allowed to buy electricity at the best rate possible which includes the railways. If they wish to call for bids to buy electricity and those bids turn out to be lower than what they were paying earlier, then nobody should stand in the way. The states should come on board. Saving money by the railways would lead to savings for the entire country including those states and passengers,” said P. Uma Shankar, former power secretary.


Source :

Smart Grid Bulletin February 2019

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