States producing thermal power bear pollution while consuming States gain benefits

Source: The post States producing thermal power bear pollution while consuming States gain benefits has been created, based on the article “Lighten the pollution burden of thermal power States” published in “The Hindu” on 18th February 2025

UPSC Syllabus Topic: GS Paper3- Infrastructures- Energy

Context: The article discusses how States producing thermal power bear pollution burdens while consuming States benefit. It suggests compensating these States through taxes or Finance Commission transfers. It highlights India’s electricity distribution, pollution impact, and the need for fair environmental burden-sharing.

For detailed information on New thermal plants: A reality check read this article here

What is the current status of electricity produce in India?

1. Total Installed Capacity: India’s total electricity generation capacity stands at 4,56,757 MW.
2. Sector-wise Distribution:

• Private sector: Leads with 53.4% share.
• State sector: Holds 23.7%.
• Central sector: Accounts for 22.9%.

3. Thermal Power Share: Represents a significant portion with 2,37,268.91 MW out of the total capacity.

• Private sector: 85,899.095 MW (36.20%).
• State sector: 75,991.905 MW (32.03%).
• Central sector: 75,377.91 MW (31.77%).

4. Heavy Reliance on Coal: About 59.12% of India’s energy supply is from coal, with thermal power being a major contributor to carbon emissions.
5. State Dynamics:
6. Key Producing States:

• Maharashtra: 31,510.08 MW (highest non-renewable capacity).
• Uttar Pradesh: 26,729.374 MW
• Gujarat: 26,073.41 MW

b. Key Renewable Energy State: Rajasthan: 22,398.05 MW (highest renewable capacity).

c. Electricity Trade:

• Chhattisgarh: Largest net seller (535.29 MW).
• Gujarat: Largest net importer (528.17 MW).

6. Pollution Burden: Producing States bear pollution, but consuming States benefit.

Do Producing States Receive Any Compensation?

1. No direct compensation is given to States that generate electricity from central sector thermal power plants.
2. Jharkhand, Chhattisgarh, and Odisha produce the most thermal power but have lower per capita electricity consumption.
3. Coal-rich States bear pollution, while consuming States benefit from clean electricity.
4. Electricity production is tax-free, and GST is not imposed on transmission or distribution.
5. The Finance Commissions have recommended environmental grants, but no specific compensation exists.
6. A new mechanism is needed to share environmental costs fairly.

What Should Be Done?

1. Imposing a Tax on Thermal Power Generation

• Producing States can levy a tax on thermal power generation.
• The Union government can collect this tax and transfer it to them.

2.Compensation Through Finance Commission

• The Sixteenth Finance Commission can allocate funds based on environmental damage.
• The last three Finance Commissions have provided environmental grants.

3. Recognizing Negative Externalities

• Chhattisgarh (535.29 MW) and Odisha (95.40 MW) sell electricity but bear pollution.
• Gujarat (528.17 MW) and Maharashtra (187.50 MW) benefit without pollution costs.

4. Ensuring Fair Sharing of Environmental Costs

• A new policy must ensure all States share pollution burdens fairly.
• Electricity-importing States must compensate producing States for pollution.

Question for practice:

Examine how the current electricity distribution system in India impacts the environmental burden on producing States and the benefits received by consuming States.