Lighten the Pollution Burden of Thermal Power States

18th February, 2025

This article is part of the UPSC Daily Editorial Analysis, covering The Hindu editorial  “Lighten the pollution burden of thermal power States," published on 17th February, by the best UPSC coaching in Kolkata.

Syllabus: General Studies Paper III (Bio-diversity, Environment)

Context

In August 2022, India updated its Nationally Determined Contribution (NDC) under the Paris Agreement to the United Nations Framework Convention on Climate Change (UNFCCC).

What are Nationally Determined Contributions and what is its source? 

Nationally Determined Contributions (NDCs) are climate action pledges made by countries to reduce greenhouse gas (GHG) emissions and adapt to climate change. These pledges outline how each country will contribute to global efforts to limit temperature rise and deal with climate impacts.

NDCs are one of the primary instruments for achieving the Paris Agreement goals.

Background: Understanding UNFCCC and Paris Agreement

The United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992 at the Rio Earth Summit to address global climate change. Its main goal is to stabilize greenhouse gas (GHG) levels and prevent dangerous human interference with the climate. The treaty is overseen by the Conference of the Parties (COP), an annual meeting where countries discuss and improve climate policies.

This treaty led to important agreements like the Kyoto Protocol (1997), which set rules for reducing emissions and the Paris Agreement (2015), where all countries promised to take steps to protect the climate. These agreements help the world work together to combat global warming.

Paris Agreement under UNFCCC, is a legally binding international treaty adopted in 2015 by 196 countries. This agreement aims to keep global temperature rise well below 2°C and ideally limit it to 1.5°C above pre-industrial levels. Under this agreement, every country must update its NDC every five years with stronger targets to ensure continuous progress in fighting climate change.

What are India's updated Nationally Determined Contributions (NDCs)?

India updated its Nationally Determined Contributions (NDCs) in 2023 to strengthen its climate action commitments. The key updates include:

  • Reduction of Emissions Intensity: India aims to reduce the emissions intensity of its GDP by 45% by 2030 compared to 2005 levels.
  • Energy from Non-Fossil Fuels: India targets having 50% of its installed electric power from non-fossil fuel sources by 2030.
  • Carbon Sink Creation: India commits to creating a carbon sink of 2.5–3 billion tonnes of CO₂ equivalent through afforestation and other measures by 2030.
  • Climate-Resilient Infrastructure: India focuses on building climate-resilient infrastructure to adapt to climate change impacts.
  • Sustainable Lifestyles (LiFE Initiative): India promotes sustainable production and consumption practices through the LiFE Initiative.

 India’s Net Zero Target for 2070 which was announced at COP26 in Glasgow (2021) aligns with its long-term strategy to achieve carbon neutrality.

 ISSUE PERSISITING: Currently, thermal power dominates India’s electricity production. Under the new framework, thermal power will still hold a 50% share in electricity generation.

 How does thermal power contribute to carbon emissions?

Thermal power plants contribute significantly to carbon emissions. The States producing thermal power bear the pollution burden while the consuming States benefit. This raises concerns about who should bear the costs of pollution.

India’s total installed power generation capacity is 4,56,757 MW, divided as follows:

  • Central sector: 22.9%
  • State sector: 23.7%
  • Private sector: 53.4%

Thermal power generation capacity (Total: 2,37,268.91 MW):

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

According to NITI Aayog, India’s electricity generation emits 20,794.36 kg of carbon. 

What is India’s coal reserve and dependency?

As of April 1, 2023, India’s total coal reserves are 378.21 billion tonnes with Odisha holding the largest share (94.52 billion tonnes).

India’s energy mix (2022-23):

  • Coal-based electricity: 73.08% (1,180,427.19 million units)
  • Oil-based electricity: 1.48% (23,885.04 million units)

Thus, thermal power remains India’s primary source of electricity and the biggest contributor to emissions. 

How does state-wise electricity generation and consumption vary?

India’s electricity generation and consumption do not always align. For example, States like Uttar Pradesh, Odisha and Chhattisgarh consume only a fraction of the electricity they generate. 

Top States for Non-Renewable Electricity Generation Capacity (2022-23):

  • Maharashtra: 31,510.08 MW
  • Uttar Pradesh: 26,729.374 MW
  • Gujarat: 26,073.41 MW

Top States for Renewable Energy Generation Capacity:

  • Rajasthan: 22,398.05 MW

However, electricity generation does not match consumption.

For example:

  • Uttar Pradesh, Odisha and Chhattisgarh consume only 40%, 38.43% and 29.92% of the electricity they generate through NTPC.
  • Gujarat is the largest consumer of NTPC-generated electricity (4,612 MW) despite producing only 17.7 MW in its NTPC plants.
  • Maharashtra and Gujarat purchase electricity from other States.

What is the pollution burden on thermal power producing states?

States such as Tripura, Bihar, Chhattisgarh and Jharkhand have a high share of thermal power in their total electricity generation but do not consume all the power they generate, leading to an imbalance in pollution responsibility.

States with the highest thermal power share in total electricity generation:

  • Tripura: 96.96%
  • Bihar: 95.57%
  • Chhattisgarh: 94.35%
  • Jharkhand: 92.69%
  • Delhi: 87.96%
  • West Bengal: 87.72%
  • Uttar Pradesh: 81.84%

However, these States do not consume all the electricity they generate.

  • Bihar sold 16,529.62 MW of electricity in 2022-23.

How does electricity trade affect state power distribution?

Electricity-exporting States like Chhattisgarh and Madhya Pradesh export significant amounts of electricity, while importing States like Gujarat and Haryana rely on others to meet their energy needs.

Top electricity-exporting States (2022-23):

  • Chhattisgarh: 535.29 MW
  • Madhya Pradesh: 379.19 MW
  • Himachal Pradesh: 153.43 MW
  • Rajasthan: 135.14 MW
  • Odisha: 95.40 MW
  • Meghalaya: 55.22 MW

Top electricity-importing States (2022-23):

  • Gujarat: 528.17 MW
  • Haryana: 212.63 MW
  • Maharashtra: 187.50 MW
  • Delhi: 162.97 MW
  • Punjab: 160.82 MW
  • Tamil Nadu: 128.37 MW

Why is there a lack of compensation for thermal power producing states?

  • There is currently no compensation mechanism exists for States that generate electricity from central sector thermal power plants.
  • Coal-rich States like Jharkhand, Chhattisgarh and Odisha bear high pollution burdens but do not receive adequate financial compensation.
  • Despite producing the most electricity, these States have low per capita electricity consumption.

How is electricity taxed and regulated in India?

  • Electricity is a Concurrent subject (Entry 38, List III, Seventh Schedule of the Constitution), meaning both the Centre and States can legislate on it.
  • States can levy taxes on electricity consumption and sale, but not on its generation.
  • The Centre does not impose any specific tax on electricity production.
  • Electricity is exempt from GST.
  • The Ministry of Power (October 2023) barred States from imposing additional taxes on power generation.

Thus, consuming States get revenue from electricity duty, while producing States bear the pollution without compensation.

What are the proposed solutions for compensation?

Since thermal power-producing States bear the pollution burden while others benefit, a compensation system is necessary.

Possible mechanisms:

  • Thermal power-producing States should be allowed to tax power generation.
  • The Union government could collect a tax on generation and transfer it to producing States.
  • The Finance Commission could introduce a compensation mechanism for power-producing States.
      • The last three Finance Commissions have recommended environmental and climate change-based fund transfers.
      • The 16th Finance Commission should develop a fiscal roadmap to align with India’s international climate commitments.

Conclusion

Thermal power-producing States must be compensated for environmental damage. The Centre and Finance Commission must introduce policies to ensure fair revenue distribution and address India’s climate goals. 

PRACTICE QUESTION

Q.Discuss the role of thermal power in India's emissions and the challenges related to compensation for thermal power-producing states. 150 Words

1. What are Nationally Determined Contributions (NDCs)?

NDCs are climate action pledges made by countries to reduce emissions and adapt to climate change under the Paris Agreement.

2. What are India’s key updates in its 2023 NDC?

India aims for a 45% emissions intensity reduction, 50% non-fossil fuel power by 2030 and creating a 2.5–3 billion tonne carbon sink.

3. How does thermal power contribute to carbon emissions in India?

Thermal power is the largest contributor to India’s carbon emissions, with significant pollution from coal-based plants.

4. How does state-wise electricity generation and consumption vary in India?

Some states generate more electricity than they consume, leading to power distribution imbalances.

5. What is the proposed solution for compensating thermal power-producing states?

Proposals include taxing power generation in producing states, collecting central taxes and using the Finance Commission for compensation.