Centre directs captive coal plants to run at full capacity from October 1

Why in the News

The Centre has directed about 112 captive coal based power plants to run at maximum available capacity from 1 October to 31 December. It invoked Section 11 of the Electricity Act, 2003, an emergency power, because September peak demand came close to the year’s summer peak. Plants built to supply their own factories are now a reserve for the public grid.

What is a captive power plant, and why direct one to run?

1. What it is: A captive power plant is a station a factory builds to power its own operations rather than to sell electricity, like a building running on its own generator.
2. Why factories build them: Captive generation is exempt from the cross subsidy surcharge, an extra charge grid consumers pay that funds cheaper supply to other categories, so self supply costs less.
3. What the emergency power does: Section 11 of the Electricity Act, 2003 lets the government order a station to operate as it directs in extraordinary circumstances, overriding the owner’s commercial choice.
4. The takeaway: An emergency provision is pulling privately owned capacity into the public market, because the grid has no other reserve it can order into service quickly.

What does the direction require?

1. Who is covered: Every coal based captive plant of 50 megawatt and above must generate to the maximum extent of its available capacity.
2. Surplus to the market: After meeting its own factory demand, a generator must offer the surplus on the power exchanges, where electricity is traded for the next day or the next hour.
3. Fuel stock: Generators must hold adequate coal stock so fuel availability does not limit generation.
4. Weekly reporting: Generators must report weekly to the Central Electricity Authority, the government’s technical adviser on power planning, on generation, captive use, exchange sales and coal stock.

Why was it invoked in September?

1. Out of season demand: Electricity demand rose unusually this September and approached peak summer levels, so capacity kept for May was needed out of season.
2. A September record: Peak demand touched 269 gigawatt, the highest ever recorded in that month and almost equal to the year’s May peak.
3. Not a first invocation: The provision has been used in earlier years during peak summer months.

What does the Coastal Gujarat Power extension add?

1. A second invocation: The power ministry extended the same mechanism to Coastal Gujarat Power Ltd, Tata Power’s imported coal based station, until 31 December, continuing an arrangement running since March.
2. Why it had shut: The 4 gigawatt station sat idle for nearly six months, because imported fuel costs were high and no viable power purchase arrangement existed.
3. A revised contract reopened it: The Gujarat government approved a revised power purchase arrangement earlier this year, clearing the way for long term supply to resume.
4. Why only this plant: The recorded ground is that other imported coal based plants were operating without difficulty.

Challenges

1. An exception used as policy: Section 11 is written for extraordinary circumstances, and repeated seasonal use turns a statutory exception into a planning instrument with no fixed review.
2. Captive generators carry the risk: An industrial user ordered to run flat out buys more coal and sells the surplus at exchange prices it does not set.
3. Coal logistics, not capacity, binds: Maximum generation depends on coal rakes, the trainloads that carry fuel to a plant, actually arriving, which a direction cannot create.
4. The shortfall is a few hours long: Demand peaks in the evening, so ordering stations built to run steadily all day adds energy the grid does not need.

Way Forward

1. Contract the reserve instead of ordering it: The Ministry of Power should buy captive surplus as a paid seasonal reserve, so capacity is available without an emergency provision.
2. Pay for standing by: Widen the ancillary services market, which pays a generator to stay on standby for the grid operator, so flexible capacity earns for being available.
3. Build for the evening peak: Tie battery storage and pumped hydro tenders to evening peak hours, since that is where the shortfall sits.
4. Stock before the season: The coal ministry and the railways should fix rake plans and plant stock targets before each demand season.

Conclusion

The grid no longer has a single summer peak, and the Centre is meeting the new one by ordering private industrial capacity into the public market. What to watch is whether that reserve is contracted in advance or ordered again under an emergency power.

Matching Previous Year Question

“[2026, GS3, 15 marks] Explain the key challenges for India’s energy security. What measures do you suggest for ensuring energy security along with economic growth and sustainability?”