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At a time when the power ministry is seeking to lower the threshold limit for mega power projects to allow more projects to avail of sops under this scheme, the Finance Ministry has already sounded out that the mega power policy is 8220;flawed8221; and could lead to increasing costs of projects rather than bringing them down.

A final word from the Finance Ministry on the revised mega power policy is still awaited, but it said a few weeks ago while commenting on a separate policy to award bulk contracts to BHEL that the mega power policy itself is flawed as it does not allow players to participate on a level playing field. Added to this, the ministry points out that this policy in its current form also allows domestic manufacturers to quote higher prices while availing of several tax benefits, leading to an increase in the cost of the project.

Under the present mega power policy, projects upto a particular capacity 1000 mw for coal and 500 mw for hydel willing to make inter-state sale can avail of fiscal concessions that includes waiver from customs duty on equipment imports as well as a ten-year tax holiday. Despite these concessions, the policy has failed to attract investments from the private sector on account of the conditions that are attached with this policy. For instance, the policy mandates that cities with more than 1 million population that want to source power from these projects must have privatised distribution.

Given the pace at which states are privatising power distribution only Orissa and Delhi have done this to date the ministry of power wants to do away with this clause that requires cities above a certain population level to have private power distribution.