New Delhi, July 12: Faced with an alarming power shortage and a dismal track record of failing to add new capacity as per targets year after year, the Union Power Ministry, for the first time in a decade, has proposed to radically reform its Mega Power Policy.
Under this, it plans to remove all preconditions — save for competitive tariff bidding and price preference for domestic bidders — that are customary for setting up mega power projects (minimum of 1,000 MW in fossil fuel-fired and 500 MW in hydroelectric).
Although an addition of 78,700 MW was targeted for the 11th Five Year Plan (2007-12), a capacity of only 15,074 MW has been commissioned until June 2009.
According to the new proposal, obtained by The Sunday Express, no longer will a project developer have to sign up its long-term buyers — one of the key reasons identified for delays — to begin construction. All it would need is to submit a bond pledging that it would have the long-term power purchase agreements (PPAs) in place before electricity starts flowing from the project.
That’s not all.
At present, seven-year tax holidays and Customs duty exemption on equipment imports is available to projects that cater to two or more states where distribution has been privatised in towns with population exceeding 10 lakh. The developer has to buy equipment through international bids and, in case of public sector projects, provide a 15% price preference to domestic manufacturers of power equipment.
“This (inter-state) condition has become redundant now when the production/demand of power in the states has increased substantially in line with economic growth...The additional large capacities being implemented, coupled with the Open Access Policy in transmission, will obviate the need for mandatory requirement regarding inter-state sale of power which sometimes is a cause for delay,” the Ministry has said.
The price preference is being retained for “five more years or till competitive bidding for all new generation projects is introduced for all public sector projects under the New Tariff Policy 2006” following Department of Heavy Industry’s view that its removal would favour imports rather than encourage domestic capital goods industry.
India suffered a peaking shortage of 13.8% during April 2008-January 2009 with the overall energy shortage at 11% during the same period.
