Mega power policy eased to encourage projects

Mega power policy eased to encourage projects

New Delhi: The government on Thursday amended the mega power policy, as per which states controlling the power distribution system would be allowed to purchase power from mega power units in a bid to encourage such projects.

Now such states have to give an undertaking to carry out distribution reforms as laid down by the ministry of power, which mandates privatisation of distribution in the future, according to changes in the mega power policy approved by the Cabinet.

“The existing condition of privatisation of distribution by power purchasing states would be replaced by the condition that power purchasing states shall undertake to carry out distribution reforms as laid down by the ministry of power," a statement on the Cabinet decision said.

Earlier, this condition of not allowing states that have not privatised distribution of electricity to purchase power from mega power plants was frustrating for these power producing firms because of limited market as a large number of states have not reformed electricity distribution.

Mega power plants are those which have the capacity of generating electricity at least 1,000 MW.

Some states like Delhi have privatised power distribution. A few cities like Mumbai, Ahmedabad, Surat, Noida, Kolkata have also done so, which in the rest of the country the power distribution system is controlled by the government.

The Cabinet also decided to remove the condition requiring inter-state sale of power for getting mega power status. Earlier only those projects were granted mega power status which had inter-state power sale agreements.

The government also extended the benefits of mega power policy to the supercritical power projects to be awarded through the International Competitive Bidding (ICB) route with the mandatory condition of setting up indigenous manufacturing facility.

The supercritical technology is more environment-friendly and efficient. But the developer using this technology have to source equipment from vendors having manufacturing facility in the country. Currently, only state-run Bhel has such facility. The other private players are yet to start production.

In another major change in the policy, the government allowed the developers to procure equipment of the mega power projects without undertaking the ICB route. But on a condition that either the project has been awarded or requisite quantum of power has been tied up through tariff based competitive bidding.

Providing a level playing field to the private players, the government also mandated in the policy that the 15% price preference available to the domestic bidders in case of PSU projects would not apply to tariff based competitive bid projects of these state-run companies.