October 01, 2009, New Delhi: On October 1, 2009, the Union Cabinet approved modifications in the existing Mega Power Policy. This would encourage setting up of mega power plants to take advantage of economies of scale and improve their viability. It will simplify the procedures for the grant of mega certificates and encourage capacity addition. It will also encourage technology transfer and indigenous manufacturing in the field of super critical power equipments.

The Mega Power Policy was introduced in November 1995 for providing impetus to the development of large-scale power projects in the country and derives benefit from economies of scale. These guidelines were modified in 1998, 2002 and were last amended in April 2006 to encourage power development in Jammu and Kashmir and the North Eastern region.

In order to rationalise the Mega Power Policy and bring it in consonance with the National Electricity Policy 2005 and Tariff Policy 2006, the following modifications of the existing Mega Power Policy have been envisaged:

(i) 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.

(ii) The conditions requiring inter-state sale of power for getting mega power status would be removed.

(iii) The present dispensation of 15% price preference available to the domestic bidders in case of cost plus projects of Public Sector Undertaking (PSUs) would continue. However, the price preference will not apply to tariff-based competitively bid projects of PSUs. A Committee would be set up under the Planning Commission, with the Department Heavy Industry (DHI), Ministry of Power (MoP) and the Department of Revenue (DoR) with members who would suggest options and modalities to take care of the disadvantages suffered by the domestic industry related to the power sector, keeping all factors in view.

(iv) The benefits of Mega Power Policy will also be extended to supercritical projects to be awarded through Industry Classification Benchmark (ICB) with the mandatory condition of setting up indigenous manufacturing facilities, provided they meet the eligibility criteria.

(v) The requirement of undertaking international competitive bidding by the developers for procurement of equipments for Mega Power Projects would not be mandatory, if the requisite quantum of power has been tied up through tariff-based competitive bidding or the project has been awarded through tariff-based competitive bidding.

(vi) A basic custom duty of 2.5% only would be applicable on brownfield expansion of existing mega projects. All other benefits under Mega Power Policy available to Greenfield projects would also be available to expansion units (brownfield projects) even if the total capacity of expansion units is less than the threshold qualifying capacity. However, the size of the units should not be less than that provided in the earlier phase of the project granted of the mega power project certificate. All other conditions for grant of the mega power status shall remain the same.

(vii) Mega Power Projects would be required to tie-up power supply to the distribution companies or utilities through long-term Power Purchase Agreement PPAs and may also sell power outside long-term PPAs in accordance with the National Electricity Policy 2005 and Tariff Policy 2006, as amended from time to time by the Government of India (GoI).

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