The recent relaxation of Flue Gas Desulphurization (FGD) requirements for certain coal-fired power plants has been seen as a financial relief for thermal power producers, according to a report by CareEdge Ratings.
In a notification dated July 11, 2025, the Ministry of Environment, Forest and Climate Change (MoEF) introduced significant amendments to existing FGD norms, particularly those governing sulphur dioxide (SO₂) emissions from coal and lignite-based thermal plants. FGD systems are used to reduce SO₂ emissions from the exhaust of coal-fired plants, helping limit air pollution.
CareEdge noted that, with capital expenditure for FGD systems estimated between ₹0.6 crore and ₹0.8 crore per megawatt (MW), the exemption could reduce the industry’s capex burden by as much as ₹87,000 crore to ₹1.16 lakh crore. Additionally, this move is expected to save an estimated ₹19,000 crore to ₹24,000 crore annually in tariff-related costs, translating to a reduction of ₹0.17 to ₹0.22 per unit of electricity.
As per the revised regulations, plants located outside designated sensitive zones—classified as Category C—will be exempt from the mandatory SO₂ emission requirements, provided they comply with other environmental norms.
Despite accounting for only 47% of India’s installed power generation capacity in 2024–25, coal-based thermal plants generated approximately 75% of the country’s electricity during the year. This is largely due to their higher plant load factor (PLF) compared to renewable and hydro sources.
“While the country continues to focus on expanding renewable energy capacity, coal-based generation will remain a key part of the energy mix, contributing around 60% of total power generation by 2029–30,” the CareEdge report stated.
In absolute terms, thermal power generation is expected to reach approximately 1,233 billion units by 2029–30, reflecting the growing overall energy demand.
However, the dominance of coal in India’s power sector has raised environmental concerns. According to an International Energy Agency (IEA) study from 2015, coal-based plants contribute nearly half of the country’s sulphur oxide emissions and around 30% of nitrogen oxide emissions.
To address these concerns, the government introduced stricter emission standards in 2015, especially for plants commissioned after January 2017. Compliance required the installation of costly FGD systems, leading to substantial capital investments by power producers.
Under the revised guidelines, thermal power stations have now been divided into three categories. Category A includes plants within 10 km of the National Capital Region or cities with populations exceeding one million; these must comply with SO₂ limits by December 2027. Category B plants, located near critically polluted areas or non-attainment cities, will have their compliance timelines determined individually by an expert appraisal committee, with applicable deadlines set for December 2028.
These regulatory changes aim to strike a balance between environmental concerns and the financial viability of India’s thermal power sector as it transitions toward a more sustainable energy future.
