Govt eases mega power policy

With the intention of opening lanes for capacity addition in states that have not pursued privatised distribution,the government on Thursday approved long-awaited revisions to the nations power policy. This policy is applicable for projects generating at least 1,000 mega watts. The Cabinet hopes the broader policy,inclusive of incentives for nearly all investors in traditional and supercritical thermal projects,will lead to an improvement in Indias open access power trading system.

Indias new mega power policy MPP is geared at alleviating restrictions and awarding all parties that invest time and resources in adding capacity through large projects. Among the noteworthy amendments to the 1995 policy is a new norm that allows states that own their power distribution networks to buy power from 1,000 MW plants. The previous policy mandated states to privatise distribution before sales with mega plants could be made this decision despite power ministry guidelines which have required privatisation down the line.

States will no longer be required to sell the power generated by their mega power plants in order to receive mega power certification. However,the state or privatised distribution company would be required to tie-up with the power generator to ensure power supply through long-term power purchase agreements PPA. However the generator may also sell power outside long-term PPAs in accordance with the National Electricity Policy 2005 and Tariff Policy 2006, reads a ministry release outlining the cabinet decision.

Domestic bidders will continue to receive 15 per cent incentives for mega power projects. However the price preference will not apply to tariff based competitively bid projects of public sector undertakings, reads the release. Developers will no longer have to comply with the requirements of international competitive bidding to obtain equipment for mega power projects. A basic custom duty of 2.5 per cent would be applicable on brownfield expansion of existing mega projects.