Shimla: In a major policy shift, Himachal Pradesh has decided to stop supplying electricity to neighbouring states on an “electricity banking” basis. The Himachal Pradesh State Electricity Board (HPSEB) has formally discontinued the decades-old system after the state government failed to provide the board its allocated share of 1,800 million units of electricity.
The state government has now chosen to sell its share of “free power” (received as royalty from power projects) directly in the open market to generate higher revenue, instead of supplying it to the Electricity Board at subsidised rates.
Under the previous arrangement, the government used to provide its share of power to the Board at a concessional rate of ₹3.50 per unit. The Board would then supply this surplus electricity to neighbouring states — primarily Punjab, Haryana, Uttarakhand, Delhi, and others — during the summer months on an electricity banking basis. In return, the borrowing states were supposed to return an equivalent amount of power during the winter season.
With the discontinuation of this system, the Electricity Board will now be forced to purchase power from the open market at significantly higher rates during the winter months starting this year.
How Electricity Banking Worked
Himachal Pradesh, being a hydro-rich state, generates surplus electricity during the summer and monsoon seasons when river flows are high and domestic demand is relatively lower. Under the electricity banking mechanism, the state would “lend” this surplus power to other states and reclaim it during the lean winter months (November to February), when generation drops due to reduced water levels but demand rises sharply.
Power experts have traditionally described this system as highly advantageous for Himalayan states dependent on run-of-the-river hydroelectric projects, which are seasonal in nature.
The new policy is expected to have a significant financial impact on the Himachal Pradesh State Electricity Board. Without the electricity banking arrangement, the Board will lose the ability to offset winter shortages with previously banked power and will instead have to buy expensive power from the market.
The state government’s decision to sell its free power in the open market is being seen as a move to improve its own finances. However, it puts additional pressure on the Electricity Board, which is already grappling with high power purchase costs and transmission losses.
