No big sops for captive,merchant power plants

Bowing to pressure from ministries concerned,the power ministry has decided against extending mega power benefits to merchant power plants...

Bowing to pressure from ministries concerned,the power ministry has decided against extending mega power benefits to merchant power plants (MPPs) as well as captive power plants (CPPs) in the near future.

In a note prepared for the Union Cabinet on modifying the mega power policy,the power ministry pointed out that in view of the concerns expressed during inter-ministerial consultations on extending MPP benefits to MPPs and CPPs,the matter has been re-considered and it has been decided that they may not be considered for the said benefits for the time being.

In an earlier draft Cabinet note,the ministry had proposed that CPPs and MPPs may be brought in the ambit of the mega power policy for grant of incentives,subject to fulfillment of threshold capacity limit of 1,000 mega watt for thermal power.

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The objective of the MPP,which was introduced in 1995,was to provide an impetus to large power projects in the country and derive benefit from economies of scale. The policy guidelines were modified in 1998 to extend fiscal concessions. It was further modified in 2006 to encourage power development in Jammu and Kashmir and the northeastern region.

Pitching for allowing merchant sales of up to 40 per cent of saleable energy in hydel power projects and 15 per cent in thermal power projects,the power ministry,however,said developers would be required to tie-up the balance amount of power through long-term power purchase agreements to be approved by the appropriate regulatory commissions or by tariff-based bidding for grant of mega power status.

It also proposed that the developer be allowed to submit 100 per cent bank guarantee for the amount of customs duty/ deemed export benefits availed at the time of clearance of goods.

The ministry has also sought Cabinet approval on doing away with the price preference clause while granting mega power status,saying it is not in the interest of obtaining cheapest power for the consumer. Making a case for having a re-look at the policy,the ministry pointed out that the per capita consumption of electricity (about 700 units) in India at present is very low when compared with the world average of about 2,600 units (in 2005-06).

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Despite the fact that India is the sixth largest country in terms of power generation,overall electricity shortages continue to be a major concern,the ministry said,while pointing out that peak shortage was about 13.8 per cent during April 2008-January 2009 on an all India basis.

To meet the growing demand and shortages encountered in various regions,maximisation of higher levels of generation capacity addition through any ownership pattern is the need of the hour, the ministry observed.