Policy for Setting up of Mega Power Projects in Pvt Sector

GOVERNMENT OF INDIA
MINISTRY OF POWER
SHRAM SHAKTI BHAVAN
NEW DELHI-110001

RAFI MARG
Secretary
D.O.No.C-286/95-IPC

10th November, 1995.


Dear Shri

Subject:- Setting up of power plants of capacity 1000 MW or more supplying power to more than one State.

When the private power policy was initiated during 1991-92, it was envisaged that these would be basically State Projects selling power primarily to the State Grid. A number of proposals were received and many of them are at various stages of finalization. However, it needs to be recognised that in order to improve the power supply, we would have to set up more than 10,000 MW of the capacity every year in the next few years which is an onerous task. Moreover, the fuel for such thermal power plants i.e. coal is basically located in Eastern and Central India, whereas the Hydel power potential is concentrated in the North east and North but a higher demand for power is in the South and the West. It is, therefore, obvious that unless Mega power projects are set up in the region having coal and hydel potential, we would not be able to tackle the increasing demand for power on the most viable route. Establishing mega projects in the coastal regions based on imported coal also poses as a feasible option.

2. It is well known that the public sector does not have adequate resources for putting up the required incremental capacity and it was primarily for this reason that the private power policy was introduced in order to attract domestic and foreign private investment.It is also a fact that the public sector does not have adequate resources for putting up additional coal mining capacity required to match the incremental generation requirement. Therefore, the Ministry of Power had been exploring the possibility of setting up mega power projects through the private sector route and the initial response has been positive. When the mega projects come up in the private sector, they would mostly also be composite proposals and include the scheme for development of the linked coal mine as well in many cases.This would be an additional advantage

3. The State in which the mega project is set up may not always be able to absorb the total power and the power would have to be wheeled to other States in the same region or in other regions in the country. This would require the promoters to enter into power purchase agreements with different States. Since it will involve number of States it would not be, perhaps, possible for one State to initiate such mega power projects and it would be desirable to have a Central organization who could play a coordinating /facilitating role and provide escort services to the promoter. This matter has been discussed at great length with Central Power Sector Utilities and the private power sector representatives and, based on these discussions, the Government has decided on the following broad policy:

a) Projects of capacity of 1000 MW and more and catering power to more than one State should be considered as a mega project.Projects which cater power to a single state, irrespective of size, would not come under this category.

b) There would be total transparency in selection of the promoters and the competitive bidding route would be followed i.e.issue of Request For Qualification' (RFQ), short listing of potential developers, inviting Request For Proposals' (RFPs) etc.The projects would not be awarded on the basis of negotiations with one party. This activity will be undertaken by POWERGRID. POWERGRID would also provide escort services,act as a facilitator and catalyst, arrange for wheeling of power generated by these mega projects and enter into separate agreement with the user SEBs/States on Transmission Tariff. However, the developer would have to enter into separate Power Purchase Agreements with the purchasing States.

c) The CEA would identify potential sites for setting up such mega projects and NTPC would prepare feasibility reports (FRs), the cost of which could be recovered from the private promoter(s) and POWERGRID would take measures for selection of promoters and help in finalising PPAs between the promoter and the SEBs. This is for your kind information.

With regards,

Yours sincerely,
Sd/-
( P. ABRAHAM )

To All Chief Secretaries CC: 1. Shri Rajendra Singh, CMD, NTPC, New Delhi. 2. Shri S.C. Parekh, CMD, POWERGRID, New Delhi.



MEGA POWER PROJECTS : REVISED POLICY GUIDELINES

guidelines for setting up of mega power projects of capacity 1000 MW or more supplying
power to more than one State had been issued vide D.O. letter N. C.-286/95-IPC, dated 10th
November, 1995. After considering the experience of this policy, the policy has been recast and is
summarised below

1. Inter-state and Inter-regional mega power projects are proposed to be set up both in the
public and private sectors. In the public sector, the National Thermal Power Corporation (NTPC)
and Damodar Valley Corporation (DVC) would be setting up the following projects: Kahalgaon
Stage II (1500 MW),North Karanpura STPP(2000 MW), Barh STPP(2000 MW), Maithon Project
(1000 MW) and Cheyyur (1500 MW). In addition, NTPC would be expanding the four gas based
plants, namely, Anta, Auriya, Kawas and Gandhar to an additional capacity of 1300 MW each.

The National Hydro-Electric Power Corporation(NHPC) would be taking up the following
Inter-state projects: Koel-Karo (710 MW), Chamera-II (300 MW), Teesta-V (510 MW), Koldam
(800 MW)and Parvati (800 MW).

In the private sector, in addition to Inter-regional Hirma (6 x 660 MW) project in Orissa, the
following projects are also proposed to be taken up: Cuddalore (1000 MW) - based on a blend of
domestic and imported coal; Krishnapattanam (1500 MW) - based on a blend of domestic and
imported coal; Pipavav (2000 MW) - based on imported coal and Narmada ( 1000 MW, which could
be expanded to 2000 MW ), based on LNG. Two or three more projects based on LNG, may be
developed on the Western coast later.These fuel options can be revised based on feasibility and cost.

2. The Standing Independent Group (SIG) which had been constituted by the Government of
India in November, 1997, to establish parameters for negotiation of large power generation projects
would initially be the apex body to oversee the implementation of the mega private power projects.
The principles of competitive bidding would be adhered to as far as possible, while obtaining tariff
offers.

3. A Power Trading Company(PTC) would be established with majority equity participation by
Power Grid Corporation of India Ltd. (PGCIL), along with NTPC, Power Finance Corporation
(PFC) and other financial institutions. Concerned State Governments/State Electricity Boards (SEBs)
would also be co-opted, if found feasible. The PTC would purchase power from the identified private
projects and sell it to the identified State Electricity Boards. As power would be sold to the States,
the concurrence of the concerned State Governments would be taken. Security to the PTC would
be provided by means of a Letter of Credit and recourse to the State's share of Central Plan
Allocations and other devolutions. However, PTC may also, if feasible, supply power directly to a
cluster', like licensees and industrial establishments. The setting up of PTC would enable mega-projects
to negotiate with one buyer only and would eliminate mega-projects risk regarding payments.
Such security would substantially bring down the tariff from such projects.

4. A pre-condition would be that the beneficiary States should have constituted their Regulatory
Commissions with full powers to fix tariffs as envisaged in the Central Act. They would also have
to privatise distribution in the cities having a population of more than one million. Similar comforts
would be given to public sector projects; however, they would deal directly with the SEBs and not
through the PTC.

5. The import of capital equipment would be free of customs duty for these projects. In order
to ensure that domestic bidders are not adversely affected, price preference of 15% would be given
for the projects under public sector, while deemed export benefits as per the EXIM policy would be
given to domestic bidders for projects both under public and private sector. The domestic bidders
would be allowed to quote in US Dollars or any other foreign currency of their choice. In addition,
the income-tax holiday regime would be continued with the provision that the tax holiday period of
10 years can be claimed by a promoter in any block of 10 years, within the first 15 years. The State
Governments are requested to exempt supplies made to mega power plants from sales tax and local
levies.

6. All such measures and the economies of scale in mega projects would substantially bring down
tariffs from such identified mega projects to provide much needed relief to State Electricity Boards
from rising tariffs from generating stations, both in public and private sector. The policy would also
enable implementation of a policy where large projects are set up at viable pit head sites, coastal
locations and hydel source, thus eliminating the unnecessary movement of fuel by rail and
encouraging the setting up of national transmission grid. The tax concessions are necessary as these
projects would help in catalysing reforms which are crucial to the restoration of the financial health
of the State Electricity Boards and would also help to accelerate the establishment of systems that
would transfer power across states and regions.

7. The projects would be offered to the developers only after all the clearances/land have been
obtained so that projects can start soon after they are granted to the most competitive bidder. The
environmental clearance would be given in two phases by the Ministry of Environment and Forest -
the site clearance being given initially. Initial project development expenses would be incurred by
designated Central Public Sector Undertaking which would be recouped from the successful
developers. PGCIL would be entrusted with developing the required transmission network. Since
the transmission network would depend upon the identification of the beneficiary states, PGCIL
would identify the schemes and the corresponding costs of these transmission schemes. It would
interact with the beneficiary states to identify the requisite investment required in transmission and
distribution on the states side to absorb the power generated by the mega project.

8. It is visualised that the country would be adding 15,000-20,000 MW of capacity through this
policy at the most competitive tariffs payable by State Electricity Boards and consequently by
consumers.




(TO BE PUBLISHED IN PART-II, SECTION-3, SUB SECTION (i) OF THE GAZETTE OF INDIA, EXTRAORDINARY, DATED THE 13TH MAY, 1999)
23 VAISAKH, 1921 (SAKA)
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)

----------

New Delhi, dated the 13th May, 1999

23 Vaisakh, 1921 (SAKA)

NOTIFICATION

No. 63 /99 - Customs

G.S.R. (E) - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 20/99 - Customs, dated the 28th February, 1999, namely:-

(I) In the said notification -in the Table, after serial number 288 and the entries relating
thereto, the following serial number and entries shall be inserted, namely:-


1 2 3 4 5 6
"288A
98.01
Goods required for setting up of any mega power project specified in List 33, if such mega power project is-

(a) an inter-state thermal power plant of a capacity of 1500 MW or more; or
(b) an inter-state hydel power plant of a capacity of 500 MW or more,

- as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power
Nil
Nil
82"

(II) in the Annexure, after condition number 81 and the entries relating thereto, the following condition number and entries shall be inserted, namely;-

Condition No. Conditions

(i) the power purchasing State has constituted the Regulatory Commission with full powers to fix tariffs;

(ii) the power purchasing State undertakes, in principle, to privatise distribution in all cities, in that State, each of which having a population of more than one million within a period to be fixed by the Ministry of Power; and

(iii) the power purchasing State has agreed to provide recourse to that State's share of Central Plan allocations and other devolutions towards discharge of any outstanding payment in respect of purchase of power;

(b) In the case of imports by a Central Public Sector Undertaking, the quantity, total value, description and specifications of the imported goods are certified by the Chairman and Managing Director of the said Central Public Sector Undertaking; and

(c) In the case of imports by a Private Sector Project, the quantity, total value, description and specifications of the imported goods are certified by the Chief Executive Officer of such projects".

(2) For the list 28 appended to the said notification, the following List shall be substituted, namely

List 28 (See S.No. 174 of the Table)

1. Apparatus for carrier current line systems or digital line systems, namely, HDSL system".

(3) After List 32 appended to the said notification, the following List shall be inserted, namely:-

List 33 (See S.No. 288 A of the Table)

Thermal Projects:

1. Kahalgaon Stage II - 1500 MW

2. North Karanpura STPP - 2000 MW

3. Barh STPP - 2000 MW

4. Cheyyur - 1500 MW

5. Hirma - 3960 MW

6. Krishnapattanam - 1500 MW

7. Pipavav - 2000 MW

Hydel Projects :

1. Koel - Karo (Bihar) - 710 MW

2. Teesta-V (Sikkim) - 510 MW

3. Koldam (Himachal Pradesh)-800 MW

4. Parvati (Himachal Pradesh)- 800 MW".

(Prashant Kumar Sinha)

Under Secretary to the Government of India

F.No. 354/73/98-TRU

Note:- The principal notification was published in the Gazette of India vide notification No. 20/99-Customs, dated the 28th February, 1999 ( G.S.R. 156 (E), dated the 28th February, 1999) and was last amended by Notification No. 60/99-Customs dated the 11th May, 1999 (G.S.R. 332(E), dated the 11th May, 1999)




F.No. A-108/98-IPC-I

GOVERNMENT OF INDIA
MINISTRY OF POWER
Shram Shakti Bhawan
Rafi Marg,New Delhi-110001
Dated: the 31st May, 1999

OFFICE MEMORANDUM

Sub: Grant of price preference to domestic Manufacturers of Capital Goods supplied to Mega Power Projects under deemed export status

1.0 Government have decided that the domestic manufacturers supplying capital goods to Public Sector Mega Power Projects, certified by the Ministry of Power under the revised policy for Mega Power Projects, under International Competitive bidding would be accorded price preference. The price preference to be given to the domestic manufacturers has been fixed at 15%. The preference margin shall not be applied to the whole package, but only to the locally manufactured equipment within the package. For this purpose, the bidders would be required to quote domestically manufactured capital goods on Ex-works basis and the capital goods to be supplied from abroad on a CIF basis. For evaluation and comparison of bids, the bid price of the bidders would be increased by 15% of such CIF component contained in their price bid. Bidders seeking qualification on the basis of collaboration with manufacturer(s) for a particular equipment(s), shall be required to quote the price of such equipments on CIF basis, if equipments are imported by such manufacturers . If such prices are not quoted on a CIF basis, the Owner/Utility would make its own assessment of CIF prices of such equipments for the purpose of evaluation and the bid prices will be increased by 15% of CIF component.

2.0 Government have advised the State Governments to exempt supplies made to Mega Power Plants from sales tax and local levies. Accordingly, the sales tax on domestically manufactured capital goods, the local levies and octroi will not be considered for the purpose of evaluation of bids, irrespective of the fact whether the State Government provide the exemption or not, which will be in line with provisions of Office Memorandum No.DPE/5(5)/97-Fin dated 12.08.97 from Ministry of Industry, Department of Public Enterprises.

3.0 This supersedes instruction(s), if any, issued in this regard.

4.0 The administrative Ministries may please bring the above to the notice of the public sector enterprises under their administrative control.

(P.K.SINGH)

DEPUTY SECRETARY TO THE GOVERNMENT OF INDIA

Tele : 3717753

   To:

  1. Secretary, Department of Public Enterprises/Secretary, Department of Revenue, Ministry of Finance/Secretary, Department of Economic Affairs, Ministry of Finance, New Delhi.
  2. Secretary, Department of Heavy Industries/CMD, BHEL.
  3. Chairman/Members, Central Electricity Authority, R.K. Puram, New Delhi.
  4. All PSUs under the Ministry of Power.
  5. PS to MOP/ PS to Secretary(P)/ PS to Special Secretary (P).
  6. All Joint Secretaries in the Ministry of Power.


To be published in part II. Section 3, sub-section (i) of the Gazette of India (extraordinary), dated the 1st June, 1999

11 JYAISTHA, 1921 (SAKA)

Government of India
Ministry of Finance
Department of Revenue
New Delhi, the 1st June, 1999
11 Jyaistha, 1921 (SAKA)

NOTIFICATION

NO. 70/99-CUSTOMS

G.S.R. 401(3) :- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 36/97-Customs, dated the 11th April, 1997, namely:-

In the Explanation to the said notification, in clause (iii), after sub-clause (g), the following shall be inserted, namely:-

"(h) supply of goods to any of the mega power projects specified in list 33 appended to the notification of the Government of India in the Ministry of Finance (Department of Revenue) number 20/99-Customs dated the 28th February, 1999, if such mega power project is -

(1) an inter-state thermal power plant of a capacity of 1500 MW or more; or

(2) an inter-state hydel power plant of a capacity of 500 MW or more,

-as certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power."

(Sandeep Ahuja)

Under Secretary to the Government of India

F.No. 605/153/98-DBK

Note: The principal notification No. 36/97-Customs dated 11.4.1997 was published in the Gazettee of India, (Extraordinary) vide GSR 216 (E), dated 11.4.1997 and last amended by notification No.52/98-Customs dated, the 18th July, 1998 published in the Gazette of India (Extraordinary) vide GSR No.398 (E), dated 18.7.1998.



(To be published in part II, Section 3, Sub-Section (i) of the Gazette of India, Extraordinary, Dated the 28th July 1999)

Government of India
Ministry of Finance
(Department of Revenue)
*****
New Delhi, dated the 28th July, 1999

Notification

No. 100/99-Customs

G.S.R. 557(E)- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 20/99- Customs, dated the 28th Feburary, 1999, namely:-

In the said notification,-

(I) in the table, against serial number 288A, in column (3), for the figures and letters A1500 MW@, the figures and letters A1000 MW= shall be substituted;

(ii) in List 33 appended thereto, under the heading AThermal projects@, after item number 7 and the entry relating thereto, the following item numbers and entries shall be inserted namely:-

A 8. Maithon- 1000 MW

9. Anta- 1300 MW

10. Kawas- 1300 MW

11. Auraiya- 1300 MW

12. Gandhar- 1300 MW

14. Cuddalore- 1000 MW

15. Narmada- 1000 MW@

(Prashant Kumar Sinha)

Under Secretary to the Government of India

F. No. 354/94/99-TRU

Note- The principal notification was published in the Gazette of India, Extraordinary vide notification No. 20/99- Customs, dated the 28th Feburary, 1999 (G.S.R. 156(E), dated the 28th Feburary, 1999) and was last amended by notification no. 93/99-customs, dated the 16th July, 1999 (G.S.R. 526 (E), dated the 16th July, 1999)