New policy to give fillip to power sector
Sanjay Dutta & Mahendra K Singh, TNN, 1 October 2009

NEW DELHI: The Cabinet is scheduled to take up on Thursday modifications in the mega power policy that will make it easier for generation
projects to qualify for financial and tax incentives besides giving a fillip to the sector in line with PM Manmohan Singh’s thrust on ramping up capacity addition.

The new norms are expected to drop the clause on mandatory privatisation of distribution networks for states that plan to buy electricity from plants of up to 1,000 mw. The modified policy also proposes to scrap the condition requiring a mega power project to sell electricity to states other than where they are located.

The proposal to drop the mandatory privatisation clause has been in the works since September 2007 after several states and the Left, which was then supporting the UPA government, had opposed it. Though the Left does not have any influence on UPA-2, opposition from the states still remain. Besides, opinion in government cirlces is that there may not be many takers for offers to privatise distribution networks in during the slowdown.

The clause on inter-state power sale is being done away in view of the rise in demand in states, making it possible for industrialised ones such as Maharashtra and Gujarat to consume all the 1,000 mw that a mega power project can generate. Giving a thrust to enhancing generation capacity, the changes also propose to give ‘mega’ status to captive and merchant power plants if they fulfill other conditions in policy, including their size — 1,000 mw for fossil fuel-fired plants and 500 mw for hydel units. Mega status will entail fiscal benefits such as tax holidays and duty breaks on import of equipment.