By Sudarshan Varadhan
NEW DELHI (Reuters) - India is considering regulatory changes to let power companies pass on costs of installing emission-cutting equipment to consumers, a government official said, a politically sensitive proposal amid rising pollution in big cities.
Record levels of smog in the capital and other major centers have piled pressure on the government and power providers to tackle a growing public heath crisis.
In response, debt-laden private companies including Reliance Power, Adani Power and GMR, as well as state-run NTPC, have been seeking billions in federal funding to retrofit coal-fired plants to cut emissions.
Alternatively, they have requested permission to pass the costs on in the form of higher tariffs - a big ask in a country where many consider cheap electricity a right.
Where possible, "we are looking to make regulatory changes so that the costs of environmental upgrades can be passed through," A.K. Bhalla, the top bureaucrat in the country's power ministry, told Reuters.
The government was essentially considering amending long-term power purchase agreements - which currently have clauses limiting what costs can be carried by customers, said officials.
The government was also looking to facilitate loans to power producers through state-run financial institutions to fund one-time costs related to retrofitting plants, Bhalla said.
Power Finance Corp Ltd and Rural Electrification Corp are two major state financial institutions that lend mainly to electricity generators.
Ashok Khurana, director general of the Association of Power Producers, welcomed the government proposal.
Installing the new technology would necessitate an increase in tariffs in the range of about 0.50 rupees ($0.0077) to 1.25 rupees ($0.0193) per unit, the association said in a letter to the government earlier this year, and seen by Reuters.
Environmentalists and government officials estimate the cost to be much lower.
The average power tariff in India is around 5 rupees per unit.
India is also considering advancing a deadline proposed by the Central Electrical Authority (CEA) for all coal-fired power plants to comply with the new environmental laws by 2023, Bhalla said, without elaborating.
CEA Chairman Ravindra Kumar Verma told Reuters all power companies should be able to upgrade their coal-fired plants by the end of 2022.
Thermal power companies account for 80 percent of all industrial emissions of lung-damaging particulate matter, sulphur and nitrous oxides in India. The government's current plan details a timeline for sulphur oxide and particulate matter curbing equipment, but not yet for nitrogen oxides.
($1 = 64.9200 Indian rupees)
(Reporting by Sudarshan Varadhan; Editing by Andrew Heavens)