THEBUSINESSBYTES BUREAU
BHUBANESWAR, MAY 26, 2026
Odisha could witness fresh investments worth Rs 25,000–30,000 crore in
the power generation sector over the next six to twelve months as the state
government moves to align with the Central Electricity Authority’s advisory
mandating supply of 5 per cent of capacity from newly commissioned thermal
power plants at variable charges. Industry experts believe the policy shift
could significantly improve Odisha’s attractiveness as a power investment
destination after years of lagging behind other coal-rich states.
For years, Odisha remained an outlier by continuing with its 2008–09
policy that mandated 14 per cent allocation of power to the state at variable
charges, later reduced to 12 per cent for projects with local coal linkage. In
contrast, several states, including Chhattisgarh, adopted the Centre’s 5% norm,
enabling them to attract large-scale investments in thermal power generation.
According to Inder Keshari, Director General of the Association of Power
Producers, this divergence in policy had a direct bearing on investment trends
over the past decade. Nearly 80 per cent of greenfield thermal power
investments between Odisha and Chhattisgarh flowed into the neighbouring state
despite Odisha possessing abundant coal reserves and other strategic
advantages.
“Odisha has all the enabling
factors for power sector growth — ample raw material, availability of ports, a
growing economy, and access to skilled manpower. However, the higher mandatory
allocation of power at variable cost has deterred developers. In contrast, Chhattisgarh’s
shift to a 5 per cent quota has facilitated investments of over Rs 1.5 lakh
crore, resulting in more than 16 GW of capacity addition. Odisha, by
comparison, has seen under 4 GW of capacity being set up translating into
investments of less than Rs 40,000 crore,” he said.
The changing policy environment has now revived industry interest in
Odisha, with major companies such as Jindal Power, Vedanta and Adani Group
evaluating fresh opportunities in the state.
Explaining the economics behind the policy debate, Keshari said thermal
power project costs have increased sharply over the years. While projects
earlier required investments of around Rs 5 crore per MW, the cost has now
risen to nearly Rs 15 crore per MW. As a result, fixed costs have climbed from
nearly Re 1 per unit to almost Rs 4 per unit.
Under the previous framework, the concessional supply obligation resulted
in a tariff impact of around 14 paise per unit for other consumers. However, at
current capital costs, this burden has escalated to nearly 55 paise per unit,
affecting overall project viability and discouraging private investment.
Addressing apprehensions regarding possible revenue losses to the state
under the proposed 5 per cent framework, Keshari termed such concerns largely
theoretical.
“In the absence of investment,
there is no revenue foregone. Moreover, even with the shift to a 5 per cent
allocation, the state’s actual receivables remain broadly unchanged given the
increase in fixed costs,” he said.
He further underlined the wider economic gains associated with new power
projects, noting that a typical 1,600 MW thermal power plant could generate
nearly Rs 2,000 crore in SGST during the construction phase and around Rs 100
crore annually during operations, apart from creating substantial employment
opportunities.
“Taken together, the economic and
fiscal benefits strongly support a transition to the 5 per cent allocation
framework,” he added.
Keshari also pointed to the growing pressure on India’s power
infrastructure amid unprecedented summer demand. He said the country has
already witnessed record-breaking electricity demand crossing 270 GW this
month, while late-night demand has remained unusually high at 240–250 GW due to
severe heatwave conditions.
He observed that even resource-rich Odisha has experienced power
disruptions in some areas as generation and transmission infrastructure
struggle to keep pace with rising cooling requirements and expanding industrial
demand. The state government recently invoked the Essential Services Maintenance
Act (ESMA) to ensure uninterrupted power supply and operational continuity in
the sector.
According to industry observers, Odisha’s proposed policy shift could mark a turning point for the state’s power sector by creating a more investor-friendly framework while strengthening energy security and industrial growth prospects “This revised policy of Odisha will certainly go a long way in attracting investments in Power sector of the state and maintain Odisha in frontline in times to come,” Keshari added.
