SRPC seeks Centre's intervention in FDG cost dispute

CHENNAI: Power distribution companies are facing a dilemma over whether the cost incurred for flue gas desulphurisation (FGD) systems in thermal plants now exempted under revised environmental norms should be passed on to consumers through tariffs or absorbed by generating companies, a deadlock that has prompted the Southern Regional Power Committee (SRPC) to seek intervention from the Ministry of Power.

The issue was discussed at the 57th SRPC meeting held on March 17, 2026, following deliberations at the 54th Technical Coordination Committee meeting on March 16. With stakeholders unable to arrive at a consensus, the forum decided to refer the matter to the Centre for a broader consultation and final decision.

The dispute centres on whether the cost incurred for FGD systems, particularly in plants now exempted under revised environmental norms, should be passed on to consumers through tariffs or absorbed by generating companies.

The Tamil Nadu Power Distribution Corporation Limited (TNPDCL), in a communication dated March 5, 2026, flagged concerns over the financial implications of implementing FGDs in exempted categories. The utility pointed out that allowing such expenditure as a tariff pass-through would burden consumers without delivering proportional environmental benefits. Conversely, disallowing cost recovery would adversely impact the financial viability of power generators due to sunk investments.

The issue stems from a decision taken during a meeting convened by the Ministry of Power (MoP) on December 19, 2025, involving the Central Electricity Authority and central generating stations. It was decided that Category C plants where FGD contracts had not been awarded should not proceed with installations, while ongoing projects would be handled based on mutual agreement among stakeholders.

Power utilities and generating companies argued that the approach was inequitable, as distribution companies had no role in either the original environmental mandate issued by the Ministry of Environment, Forest and Climate Change or its subsequent relaxation.

During the TCC discussions, multiple stakeholders expressed divergent positions. The Andhra Pradesh Power Coordination Committee (APPCC) stated that Category C plants, now exempted, should not impose any financial burden on distribution companies. It also sought further consultations among stakeholders.

TNPDCL reiterated that imposing FGD costs on discoms without operational benefits would lead to tariff shocks for consumers and suggested that the government should bear such costs. It also emphasised the need for stakeholder consultation before making any decision.

The Tamil Nadu Power Generation Corporation Limited (TNPGCL) informed that several units at Thoothukudi and Mettur thermal power stations had applied for exemption through the PARIVESH portal, with some units already exempted.

The NTPC Limited highlighted that it had already incurred capital expenditure of around Rs 22,000 crore towards FGD implementation across projects, many of which were at advanced stages. It said discontinuation would be technically and contractually unfeasible and could lead to disputes. NTPC also stressed the risks associated with keeping installed FGDs idle, including corrosion and additional maintenance costs.

State generators, including Telangana Power Generation Corporation Limited and Karnataka Power Corporation Limited reported substantial investments in Category C plants, with projects already under way and payments largely made, limiting their ability to halt execution.

At the SRPC meeting, stakeholders acknowledged key concerns such as tariff increases, higher auxiliary consumption, rising operation and maintenance costs, and the risk of stranded assets. Concerns were also raised about the absence of clarity on cost recovery under changing regulatory conditions.

CMD of Telangana State Northern Power Distribution Company Limited stated that while generating companies may be allowed to complete FGD works, the systems may not be operated.

With divergent views persisting, the SRPC concluded that a consensus was not possible at the regional level and decided to escalate the issue to the Ministry of Power for a balanced resolution involving all stakeholders, including the Ministry of Environment, Forest and Climate Change and the Central Electricity Authority.