Only 4 projects fit for Mega Power Policy benefits

The revised Mega Power Policy, announced by the Cabinet Committee of Economic Affairs (CCEA) in March, has led to a stand-off between the government and project developers.
 
Private developers cite delay in executing the policy, while the power ministry claims only four plants are eligible for the tax refunds promised.
 
The policy is for projects over 1,000 Mw and was to expire on March 31, 2017, but the CCEA extended it by five years. Thereby doubling the period to 10 years for projects to receive the 'mega power' certificate.
 
The incentives provided in the scheme are lower customs duty and excise duty exemption for equipment.
 
The stand-off comes when capacity expansion by power developers is on hold, as there is no incremental demand.  No new power purchase agreement (PPA) has been issued by any state except Kerala and Uttar Pradesh in the past five years. Uttar Pradesh later cancelled the PPAs it had signed.

 
Close to 25 coal-based power plants with a cumulative capacity of 32,000 Mw were initially identified as beneficiaries for this policy. An amount of Rs 6,500 crore was earmarked for refunds to power developers on duties they pay for importing equipment.
 
Of these plants, only four qualify to apply for the benefits after fully commissioning capacities of 1,000 Mw by August. Government sources said these units were those of Hindustan Power, DB Power, RKM Power and MB Power.
 
The power ministry in an e-mail response to Business Standard said it had in April informed all provisional projects about the CCEA decision. The department of revenue issued a notification in May for extending the period for provisional projects. The ministry has now come up with a mechanism for release of proportionate money for eligible projects.
 
To avail the benefits, the power producers need to sign PPAs for at least 70 per cent of the electricity generated through competitive bidding and the balance through the regulated market. Projects that do not have PPAs for the stipulated amount must submit bank guarantees.

 

“Extensive discussions were held with banks, financial institutions, power producers, the department of revenue, the department of financial services and the CCEA about the mechanism to release bank guarantees for projects fulfilling the prescribed conditions and how to ensure that money realised by the developer, if any, as a result of partial release of a bank guarantee would first be utilised towards the repayment of bank dues,” the power ministry reply said.
 
The government brought in the Mega Power Policy to spur competition in the industry. "This is expected to enable developers to competitively bid for PPAs in future. Increased power availability will boost overall growth of the country and ensure that the cost of power to consumers does not increase," said the government statement issued in March.
 
Policy benefits

• Close to 25 coal-based power plants with a cumulative capacity of 32,000 Mw were initially identified as beneficiaries by this policy
• The policy is for projects over 1,000 Mw and was to expire on March 31, 2017, but the CCEA extended it by five years
• The incentives provided in the scheme are lower customs duty and excise duty exemption for equipment