Time to rise to the occasion and support CPP

“It is a natural requirement of nation and industry to install captive power plants for attaining global competitiveness,” says Rajiv Agrawal, Secretary, Indian Captive Power Producers Association (ICPPA)
Captive power plants (CPP) are necessary for continuous availability of quality power, and the shortage of fuel and coal is affecting power generation at CPP. In an exclusive email interaction, Rajiv Agrawal discusses issues surrounding captive power plants and their initiatives to promote the plants.
How do captive power plants contribute to Indian energy and power industry?It would be interesting to start with the historical contribution of CPPs to Indian growth story that will continue to stay in future.
With onset of economic liberalisation, in 1991 the government amended the Electricity Supply (Act) 1948 to allow the entry of private investors in power generation and distribution. Till that time, approvals for setting up CPP was a cumbersome process with CEA giving techno-economic clearance.
After failure to receive investment in IPP and slow industrialisation pace, by 1995 union government realised that the power availability to industry can improve only if they are persuaded to invest in CPP and get access to transmission system. Accordingly, the ministry advised all states to form suitable policies.
Captive power plants have been installed by industry, deploying huge investments and are backbone of large industry sectors responsible for national growth and infrastructure build-up, i.e. cement, chemicals, steel and iron, aluminium, zinc, paper, textile, tyre etc. These industries are first link in the national value chain by converting natural raw materials to finished goods or raw material used in down-line industries. All continuous process industries and factories working in three shifts can’t survive without CPP or backup power.
Captive power plants are the only available, efficient (PLF > 90-100 per cent), economic source (least T&D losses) of un-interrupted quality power for industry. In case of co-generation CPP, the thermal efficiency can reach 50-80 per cent for “fuel-power cycle” as against 35-42 per cent for most efficient sub-critical and super-critical IPP.
CPP are ensuring sustained GDP growth and development, generation of wide scale employment and earning incremental revenue for government through taxes and duties. CPP-based industry contributes to about 18 per cent of nation’s GDP (excluding services), employs 16 per cent of direct workforce (excluding agriculture) and to about 5 per cent of nation’s forex earnings. As per 2004-05 data, these industries added about ` 325 billion to national tax pool. All these figures do not include indirect employment and further value addition.
Captive plants take the pressure away from national grid. If SEBs/IPPs were to take load of CPPs, the entire grid will need a quality upgrade and existing power deficit in country will increase three folds. If 100 per cent of linkage coal is given by Coal India Ltd. (CIL), CPPs can also pump excess power into the grid. Assuming 10 per cent power to be excess, about 5,000 MW may add to the national power pool from already installed CPP capacity.
During power crisis and shortage, what role do captive power plants play?As explained, policy shift in 1995 towards CPP was a result of power shortage, affecting economic well-being of the nation. States realised that assured, uninterrupted, quality power at affordable price are some of the prerequisite for setting up industry.
Most states formed policies giving incentives to CPP to accelerate industrialisation in their states despite overall power crisis and states achieved visible positive results. A system of allotting fuel and coal to CPP was put in place by Coal and Petroleum Ministries. Creation of captive power generation capacities also helped power utilities spare the power and grid-capacity for the public at large.
During national grid failure in 2012, the industries with CPP were least affected, proving advantage of distributed power generation.
You may find it interesting that the actual positive roles of CPP for nation building are already recorded by policy makers in National Electricity Policy 2005.
How did ICPPA help in promoting captive power plants?It is a natural requirement of nation and industry to install CPP for attaining global competitiveness. No one needs to promote CPP. People just need to remove obstruction in fuel supply to CPP, stop discrimination of fuel quantity and price, and give equitable treatment also for power transmission and taxes by states.ICPPA takes care of interests of CPP because they are scattered across country and fragmentation lowers their negotiation power. Therefore, as an all India association, ICPPA is regularly taking up both the policies and operational issues with various ministries and agencies.
A few examples illustrate consistent efforts of ICPPA and crucial role it plays in an environment with too many contenders for limited natural resources. ICPPA provided crucial inputs during formation of New Coal Distribution Policy (NCDP 2007) to keep CPP at par with other power producers. During NCDP review by coal minister in June 2011, ICPPA’s view of equitable and non-discriminatory treatment to CPP also got resonance from the Planning Commission thus protecting interest of CPP.
ICPPA clearly highlighted that from the very beginning. Many aspects of NCDP implementation are lagging due to the efforts made by interested groups to corner this scarce natural resource. For example, NCDP provides coal distribution method for CPP with more the 1 MW, but from the beginning CPP with less than 5 MW never given coal and now even up to 10 MW CPP is denied the right on this natural resource.
ICPPA contributed to reversal of price hike after CIL raised coal prices up to 250 per cent while changing over from UHV to GCV bands pricing.
What are the challenges faced by this sector and how do you deal with them?With about 51,000 MW, captive power capacity in the country roughly 18 per cent of total installed capacity. Out of it, about 40,000 MW are coal fired; making CPP sector, and thereby the industry, highly dependent on availability of coal. Precisely, this is the biggest challenge faced by CPP.
Since 2009, the Coal Ministry has stopped issuing fresh coal linkage and LOA for CPP. As a result, 382 CPP applications for 34,000 MW are pending. As per our information, a large number of these CPP are commissioned or at advance stage. In the absence of linkage coal, many of CPP have been shutdown or operating at partial load.

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