Commerce ministry issues fresh norms for power generation in SEZs

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The government has come out with fresh guidelines for setting up of power plants in special economic zones (SEZs), stipulating that generation units could be set up only in the non-processing area of SEZs and there will be no fiscal benefits towards maintenance.

According to the modified norms, the power plants set up in IT/ITeS zones, that require uninterrupted power supply at stable frequency, will be entitled to fiscal incentives for setting up and maintenance of generating units.

"A power plant, including non-conventional energy power plant, to be set up by developer/co-developer in an SEZ as part of infrastructure facility will be in the non-processing area of SEZ only and will be entitled to fiscal benefits only for its initial setting up and no fiscal benefit would be admissible for its operation and maintenance," the commerce ministry guidelines for power generation, transmission and distribution in SEZs said.

Such a power plant can supply power to domestic tariff area (DTA) after meeting the power requirement of the SEZ subject to payment of Customs duty.

It is also stipulated that setting up of captive power plant, including non-conventional energy, could be permitted in "processing area as a unit" subject to net foreign exchange earning obligations.

"Such a power plant will be entitled to all the fiscal benefits... Including the ones for initial setting up, maintenance and duty-free import of raw material and consumables for generation of power," it added.

Further, the guidelines said SEZs which are connected to state/national grid will be allowed to create a backup power facility.

"For such power backup facility, if it is in the non-processing area, only duty benefits on capital expenditure for setting up will be available," it clarified.

The guidelines for generation, transmission and distribution of power in SEZ were initially announced in February 2009 and were revised subsequently in 2012. The notification said the present guidelines would supersede the earlier ones.