Kayamkulam thermal plant deal to be extended till 2028; Kerala agrees to pay Rs 100 crore annually

Thiruvananthapuram, Kerala: The Kerala government has agreed to pay Rs 100 crore annually to retain NTPC's Kayamkulam thermal power plant, with the agreement set to be extended until 2028. The State has informed the Regulatory Commission of its willingness to make the annual payment, and a decision on the extension is expected soon.

The Kerala State Electricity Board (KSEB) has not purchased power from the naphtha-based plant since 2015, citing its high generation cost. However, it has continued to pay the fixed costs for maintaining the facility. The state has already paid nearly Rs 1,500 crore despite not purchasing electricity from the plant.

The existing agreement with the thermal plant expired in February 2025. NTPC had warned that failure to renew the agreement would result in Kerala losing access to 180 MW of relatively cheaper electricity supplied from its Talcher plant in Odisha. Following this, the state agreed in principle to renew the Kayamkulam agreement for three years, subject to certain conditions.

The Regulatory Commission had questioned the proposal to pay Rs 100 crore annually. An assessment of the plant's annual expenses found that the cost stood at around Rs 70 crore.

The state has proposed installing a battery energy storage system (BESS) at the facility, exploring power generation using peat gas produced during the decomposition of coir waste, and setting up a floating solar power plant. An experiment to generate electricity using methanol was also conducted at the facility recently.

During recent discussions, NTPC also offered to supply 500 MW of electricity from its Sinnar plant in January and March.

The Parliamentary Public Accounts Committee, chaired by K C Venugopal, has called for the development of the Kayamkulam plant in a manner that would help address Kerala's power crisis. The committee has recommended that the state take steps, including reclaiming the land, if a project plan is not prepared within a month.