Railways unable to save on energy cost as states delay issuing NOCS

DESPITE OBTAINING a ‘deemed licensee’ status for power distribution from the government, the Indian Railways is yet to fully utilise the facility to save on its energy cost as some states namely Uttar Pradesh, Chhattisgarh, Bihar, West Bengal and Odisha continue to delay issuance of the no-objection certificate (NOC) which would have entitled the transporter to a waiver from the cross-subsidy surcharge.

Consumers in any state require to pay a hefty cross subsidy-surcharge (CSS) if they procure power from any source other than the state-owned discom, with a deemed licensee being an exception. Once NOCS from all the states are in place, the railways can directly buy power from independent power producers without attracting the CSS, which will reduce its energy cost by about 40 per cent.

Although the delays in issuance of NOCS could affect the transporter’s plan to save Rs 3,000 crore annually on its traction bill, officials at Railway Energy Management Corporation (REMCL) say the deadlock will be resolved by this year and it will not have a significant impact on its saving targets.

REMCL is a JV between Indian Railways and RITES with an equity participation of 49 per cent and 51 per cent, respectively. It mainly deals with procuring power for the transporter.

“We are migrating to the competitive bidding route for power procurement in a phased manner. We have been premium customers of various states, we had predicted that there would be some opposition and delay from states as they would not want to lose out on a bulk customer. But the issue will be resolved soon. We are procuring power from IPPS only in states which have not given the NOC that we are partly buying power from their state discoms,” an official at REMCL said, requesting anonymity.

Till the last year, the railways was completely dependent on state discoms for its traction needs. However, with states imposing industrial rates of electricity for the transporter, it began contracting power directly from power developers from last year. The railways has so far contracted 1,500 MW under the competitive bidding route, where it discovered tariff 30-40 per cent lower than charged by state discoms. With this move, Indian Railways hopes to reduce its current traction bill to Rs 8,900 crore in FY17 from Rs 10,200 crore in FY16. FE