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Home News Power Sector News New Mega Power policy - Preference for domestic equipment makers withdrawn

New Mega Power policy - Preference for domestic equipment makers withdrawn

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Mega Power PolicyThe Centre has approved modifications to the Mega Power Policy including withdrawal of 15% price preference for domestic equipment makers bidding for projects executed by PSU firms under tariff-based bidding. A ‘mega’ status entails fiscal benefits such as tax holidays and duty breaks on import of equipment for the project developer. The amendments to the policy, approved by the Union Cabinet, include scrapping the condition that required a mega power project to sell electricity to more than one State.

Under the new rules, States purchasing power from mega projects will not be required to privatise their distribution utilities to qualify for the fiscal sops under the scheme, as was mandated earlier. Instead, they just need to “undertake to carry out distribution reforms as laid out by the Power Ministry,” according to the modified policy. The clause on inter-State power sale has been done away in view of a multi-fold increase in demand across States, which now makes it possible for large industrialised States such as Maharashtra, Tamil Nadu and Gujarat to consume all of the electricity that a mega project can generate, a Power Ministry official said.

Benefits of the scheme have also been extended to the new super critical-technology based projects to be awarded through international competitive bidding, with the mandatory condition of setting up indigenous manufacturing facility.

Besides, while a basic Customs duty of 2.5 per cent will be imposed on imports for expansion of existing mega projects, all other benefits under the policy available to Greenfield projects would also be available to expansion units as well.

The modifications to the policy includes the withdrawal of the 15 per cent price preference for domestic equipment makers bidding for projects being executed by public sector companies under tariff-based competitive bidding process. However, the 15 per cent price preference will continue for domestic bidders in the case of cost plus projects being set up by public sector companies.

The threshold size requirement — 1,000 MW for fossil fuel-fired plants and 500 MW for hydel units — for projects to qualify for the mega power benefits has, however, not been tinkered with. While the term ‘mega’ project denotes stations that qualify under the Mega Power Policy criterion, the new term of ‘Ultra Mega Power Projects’ has been coined for a slew of generation plants that are coming up across the country, which have a minimum size of 4,000 MW each.

“The basic idea behind the amendments was to rationalise the policy and bring it in consonance with the National Electricity Policy 2005 and Tariff Policy 2006,” a Power Ministry official said.

Source- Hindu businessline

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