FinMin shorts Rlys' captive power plans

The finance ministry has put a spanner in the railway ministry's plan for a captive power plant. The department of expenditure has questioned the need for such a plant saying power generation is not the railways' core activity.

The ministry, along with the power ministry, has been working out formalities for the plant for the last three years.

Sources say the power ministry has replied to clarifications sought by the finance ministry. The process might further delay the project.

The railway and power ministries had in 2003 come out with a study paper, in which they agreed to look for a solution to reduce the railways' electricity bill, which comes to around Rs 4,300 crore per year.

The proposed 1000-Mw plant is to come up in Nabinagar in Bihar. It is expected to meet the railways' demand for the east and west regions.

More significantly, it would fulfil railways' need for cost-effective power. Railways' annual power requirement is 2,000 Mw, of which it buys 100 Mw from the National Thermal Power Corporation (NTPC) at Rs 2.94 per unit. It buys rest of the power from various state electricity boards at an exorbitant price of Rs 4.25 per unit, which is the industrial rate.

After the study paper, all clearances from the Public Investment Board and the environment ministry were taken. Even the differences between power and railway ministries over payment of transmission charges and whether there should be a special cell for facilitating transmission were sorted out.

If the finance ministry is convinced about the project's viability, it may give it a go-ahead for seeking Cabinet clearance. After this, a joint venture between the railway ministry and the NTPC for running the plant will materialise.

According to the Electricity Act 2003, as the railway ministry is the consuming party, it should have a minimum 51 per cent stake in the joint venture for the plant to be defined as captive.