The move comes as conflicts between power generation companies and local needs for the same power have increased over the years.

"Our PSUs (public sector units) take land, water and what do we (government) give back in return?" asks Jairam Ramesh, minister of state for power and commerce. "We will introduce this as a policy for all our PSUs. The first right of the unallocated quota from a power project should come to the nearby area. The government has already identified NTPC Ltd's power project at Kahalgaon in Bihar as a test project where the PSU will distribute power to the residents within a 10-15km radius. NTPC is very happy as it will improve their relationship with the state government."

This decision also means that NTPC will, for the first time, get into distribution.
Mint had reported on 24 January that, following a citizens' agitation in Bihar and the state government's promise to look at the privatization of the state's electricity utilities, NTPC was showing interest in managing power distribution as well.

NTPC has two plants in Bihar but these are not owned by the state government and their output can only be accessed indirectly by Bihar from a central pool. Bihar has a power generation capacity of 584MW, compared with a demand of around 1,400MW. The deficit is made up by accessing the central pool.