According to the modifications approved by the Cabinet at its meeting chaired by the prime minister, states controlling the power distribution system would be allowed to purchase power from mega power units to encourage such projects. 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.

Hurdles removed

Earlier, this condition of not allowing states that have not privatised distribution of electricity, to purchase power from mega power plants was creating hurdles for private power-producing firms. Currently, private power-producing firms have been facing limited market as a large number of states have not reformed electricity distribution system.

As defined by the power ministry, mega power plants are those which have the capacity of generating electricity at least 1,000 MW. Significantly, the conditions requiring inter-state sale of power for getting mega power status have been removed. As per the latest modifications, mega power projects would be required to tie up with distribution companies and utilities and can sell power in accordance with the National Electricity Policy 2005 and Tariff Policy 2006, it added.

The existing 15 per cent price preference for the domestic bidders like public sector undertakings would continue. From now onwards, it would not be mandatory for the developers to undertake international competitive bidding for procurement of equipment for mega power projects.

A basic custom duty of 2.5 percent would be applicable on brown-field expansion of existing mega projects. All other benefits under mega power policy available to green-field projects would also be available to expansion units (brown-field projects). These modifications in the existing mega power policy would encourage setting up of mega power plants to take advantage of economies of scale and improve their viability, an official statement said.

“It will simplify the procedure for grant of mega certificate and encourage capacity addition.

It will also encourage technology transfer and indigenous manufacturing in the field of super critical power equipment,” the statement said.