Big power project developers won’t have to wait for a formal ‘mega’ tag for availing the duty exemption they are entitled to on imports of power equipment.
To accelerate construction of power projects and bridge the widening energy deficit, the power ministry has allowed duty-exempted import of equipment by these developers on the basis of a provisional certificate.
According to the ministry’s revised guidelines, a provisional mega power project certificate would be considered where the developer has signed contracts with manufacturers for supply of equipment required for the project and paid not less than 10 per cent advance.
The developer could take delivery of the equipment within nine months from the date of provisional mega power certificate. However, the developer would have to submit attested copies of power purchase agreements (PPAs) at the earliest, but not later than 36 months of the date of provisional certificate, to the ministry.
Developers of 1,000-Mw coal-based power projects and 500-Mw hydro projects are entitled to get exemption in customs and excise duties under the mega power project policy.
The ministry issued these guidelines last week. The power industry has been complaining of delays in signing PPAs, mandatory for getting the mega power developer status, according to the National Electricity Policy, 2005 and National Tariff Policy, 2006.
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“The power sector argued the delays in signing of PPAs have led to a situation where projects have progressed substantially and are ready for import of equipment, but cannot avail the benefit of mega power project status. The sector, therefore, urged a provisional mega power project status be granted to projects that meet other requirements of the policy, based on an undertaking that PPAs would be signed according to the National Electricity Policy and National Tariff Policy,” a ministry official told Business Standard.
A developer granted provisional mega power status would have to furnish security in the form of a fixed deposit receipt from any scheduled bank for 36 months or more in the name of the President of India for an amount equal to the duty of Customs payable for such imports but for this exemption, as and when the goods arrive.
The power sector has welcomed the ministry’s decision. Subrat Ratho, Maharashtra power secretary and managing director of Maharashtra State Power Generation Co Ltd, said, “It’s a good step. However, it’s necessary that the ministry makes this applicable to PPAs signed by following the route of either Section-62 or Section-63 of the Indian Electricity Act. These sections are related to the competitive bidding route and approval of the regulatory commission route.”
Reliance Power, which is adding 35,000 Mw capacity, said the ministry’s move would boost project development.
A company spokesman said, “We welcome the new guidelines for provisional mega project status. It will benefit the much needed capacity addition in the country.”
Ashok Khurana, director general of the Association of Power Producers, said, “In the interim, developers should be allowed to avail of benefits against bank guarantee. The proposed arrangement will block developers’ capital till final certification, avoidable if the government opts for bank guarantee.”
R V Shahi, former power secretary, says, “This is a reasonable interpretation of the mega power project policy. The objective is that due to exemption of Customs and excise duty, the power price should reduce. The signing of PPAs, whether it happens earlier or later, should not affect the main intent of the policy. Therefore, this clarification is well placed so long as the consumers through the distribution companies benefit out of reduction in tariff.”