States will no longer be required to hand over the distribution of electricity in their areas to private companies, provided they commit carrying out distribution reforms to the government, according to the amended Mega Power Policy announced by the Cabinet today.
“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 by the ministry of power,” a statement issued by the government said.
The distribution of electricity is recommended to be carried out by private companies in India. But, at present, it is controlled by the government in most of the states. The amendment would allow these states to purchase power from mega power plants, which are, by definition, those that have the capacity to produce more than 1,000 Mw power annually. This was not possible so far.
To bring more power projects under the ambit of Mega Power Policy, the Cabinet has also removed the condition of inter-state sale of power for projects to get mega power status.
In another change, the government extended the benefits of the Mega Power Policy to supercritical projects that will be awarded through the route of International Competitive Bidding (ICB), provided they are sourced from a supplier which has set up domestic manufacturing facility. Supercritical technology equipment use less coal per unit of power produced and are thus considered environment-friendly.
In a similar amendment, the government removed the requirement of carrying out ICB for procuring equipment, if the developer ties up power through tariff-based bidding, or the project is awarded though such bidding.
The 15 per cent price preference available to domestic bidders in case of projects of public sector undertakings (PSUs), awarded on cost-plus basis, has been retained. The government has decided to set up a committee under the Planning Commission, with members from the Department of Heavy Industries, Ministry of Power, and the Department of Revenue, to look into the disadvantages suffered by the domestic companies in the power sector.
Mega power projects would also have to tie up power supply to distribution companies through long-term power purchase agreements (PPAs) and may also sell power outside these PPAs according to the National Electricity Policy and Tariff Policy.
The mega power policy was announced in late 1995 for promoting the setting up of large-size power projects. It was modified in 1998 and 2002 and last amended in 2006.
