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Rajasthan Restricts Use of Dholpur Gas Power Plant as Generation Cost Touches Rs 30 per Unit

Rajasthan has limited the operation of its Dholpur gas-based power plant after generation costs surged to nearly Rs 30 per unit, making it one of the state's most expensive sources of electricity. The move comes after the plant was operated for five consecutive nights from July 15 to help meet peak electricity demand, despite the absence of a power purchase agreement (PPA) with the state's distribution companies (discoms).

According to officials, Rajasthan Urja Vikas and IT Services Ltd. (RUVITL), the agency responsible for arranging power procurement for state discoms, directed Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (RVUNL) to operate the Dholpur gas-fired station during periods of high demand. However, since no formal PPA exists between the generating company and the discoms, RVUNL currently has no mechanism to recover the cost of the electricity supplied, resulting in an estimated financial burden of around Rs 13 crore over the five-day period.

The high cost of electricity generation has been attributed primarily to elevated natural gas prices and the lack of a long-term fuel supply contract. Officials noted that the Dholpur plant has not had a long-term gas sourcing agreement since 2020, forcing it to rely on expensive spot-market fuel whenever it is required to operate. This significantly increases the variable cost of generation compared with coal-based or renewable energy sources.

Recognising the financial implications, the chairman of the state discoms has directed RUVITL to utilise the Dholpur plant only under exceptional circumstances. The order specifies that the station should be operated solely during emergencies, unexpected outages of contracted generation capacity or when the State Load Dispatch Centre (SLDC) requires additional generation to maintain grid stability and system security. The directive also states that the gas-based station should not be considered a dependable resource for routine or long-term power procurement due to its prohibitively high operating cost.

Gas-fired power plants play an important role in India's electricity system because they can be started and ramped up quickly, making them valuable for meeting sudden spikes in demand and balancing variable renewable energy such as solar and wind. However, many of India's gas-based power stations remain underutilised because domestic natural gas availability is limited and imported liquefied natural gas (LNG) remains significantly more expensive than coal, resulting in higher generation costs.

The development underscores the growing challenge faced by utilities in balancing grid reliability, affordability and energy security during periods of peak demand. While renewable energy and battery storage capacity continue to expand across India, flexible gas-fired plants remain an important backup resource. However, their long-term viability depends on access to competitively priced fuel and appropriate commercial arrangements that ensure generators can recover operating costs while supporting grid stability.