No pay

• India’s electricity and environmental regulatory structures do not compensate states producing electricity from central sector thermal power plants.

• Net exporting states bear pollution burden, while net importing states enjoy clean electricity.

• Central sector thermal power is mainly produced in coal-rich states like Jharkhand, Chhattisgarh, and Odisha.

• Coal-rich states face a new form of resource curse due to lower per capita electricity consumption.

• Corporate Social Responsibility (CSR) scheme does not compensate for environmental damage.

• The National Clean Energy and Environment Fund was created to promote renewable energy and assist States with cleaner technology.

• Electricity is a Concurrent subject, allowing both central and State governments to legislate on electricity matters.

• In October 2023, the Ministry of Power issued a directive prohibiting additional taxes or duties on electricity generation.

• The electricity-producing States do not get any tax revenue but only the burden of pollution.

• A formulation to pursue is to compensate states producing thermal power under the central sector for all the electricity consumed by other States.

• Two mechanisms could be used: taxing thermal power generation in the states where central sector power plants are located, or a compensation mechanism through the Finance Commission of India.