Bhubaneswar: With the Odisha government moving to mandate supply of 5% of capacity from newly commissioned thermal power plants at variable charges, the state could attract investments worth Rs 25,000–30,000 crore in the power sector over the next six -twelve months, according to a senior industry official.
12%/ 14% state share vs 5%
Odisha has been an outlier among states in aligning with the Central Electricity Authority’s advisory to allocate 5% of capacity at variable charges for state consumption. Instead, it has continued with its 2008–09 policy mandating 14% allocation—reduced to 12% for projects with local coal linkage. This relatively higher allocation has been cited as a key factor limiting fresh investment inflows into the state, despite its abundant coal reserves.
Over the past decade, investment trends reflect this divergence. Between Chhattisgarh, another coal rich state which has seen substantial power investments, and Odisha, nearly 80% of greenfield thermal power investments have flowed into the former, said Mr. Inder Keshari, Director General, Association of Power Producers.
Investment loss to Odisha
“Odisha has all the enabling factors for power sector growth—ample raw material, availability of ports, a growing economy, and access to skilled manpower. However, the higher mandatory allocation of power at variable cost has deterred developers. In contrast, Chhattisgarh’s shift to a 5% quota has facilitated investments of over Rs 1.5 lakh crore, resulting in more than 16 GW of capacity addition. Odisha, by comparison, has seen under 4 GW of capacity being set up translating into investments of less than Rs 40,000 crore,” he said.
Industry interest in Odisha is now reviving, with companies such as Jindal Power, Vedanta, and Adani evaluating opportunities in the state.
New regime advantage
Explaining the financial implications of the earlier policy, Mr. Keshari noted that thermal power project costs have sharply escalated—from around Rs 5 crore per MW earlier to nearly Rs 15 crore today. Consequently, fixed costs have risen from approximately Rs 1 per unit to nearly Rs 4. Under the earlier framework, concessional supply obligations led to a marginal tariff impact of around 14 paise per unit for other consumers. However, at current capital costs, this impact increases significantly to about 55 paise per unit, affecting project viability.
Addressing concerns over potential revenue loss to the state due to it moving to 5% slab, Keshari described such apprehensions as largely notional. “In the absence of investment, there is no revenue foregone. Moreover, even with the shift to a 5% allocation, the state’s actual receivables remain broadly unchanged given the increase in fixed costs,” he said.
He further highlighted the broader economic benefits of policy reform. A typical 1,600 MW project could generate approximately Rs 2,000 crore in SGST during construction and about Rs 100 crore annually during operations, alongside significant employment opportunities.
“Taken together, the economic and fiscal benefits strongly support a transition to the 5% allocation framework,” he added.
ESMA implemented
Keshari further added that the country is witnessing record breaking power demand exceeding 270 GW this month and even late-night demand hovering around 240-250 MW due to extreme heatwaves. Even a well-endowed state like Odisha has been facing power cuts in some areas as Power Infrastructure and generation has not kept pace with increasing demand of cooling and industrial load and had to even resort to imposing ESMA to address the situation.
This revised policy of Odisha will certainly go a long way in attracting investments in Power sector of the state and maintain Odisha in frontline in times to come.
