The power ministry has finalised amendments to the Mega Power Policy after dropping its key demand for freedom to project developers to start construction without awaiting electricity purchase commitment from long-term buyers.

“The Committee of Secretaries (CoS) decided that the conditionality of furnishing long-term power purchase agreement (PPA) should be the pre-requisite for grant of mega-power status. The proposal to give mega-power status by furnishing a legally-enforceable undertaking or bond was not accepted,” says the finalised proposal for the Cabinet.

A PPA fixes contractual obligation on developers for project commissioning and levies penalty in case of delays, thereby making it a restrictive pact. The ministry says that one of the problems for not meeting the capacity targets in the 8th, 9th and 10th Plan periods was delay in private projects, which could not achieve financial closure due to “inordinate delay in finalisation of PPA”.

To circumvent such delays, the ministry had recommended that where “the developer has achieved financial closure but has not tied up requisite long term PPA, the developer could apply for mega-power status by furnishing a legally-enforceable undertaking or bond”.

However, the ministry has made a gain with the department of heavy industry (DHI) accepting a minor levy of 2.5 per cent basic import duty on equipments for existing mega projects planning looking to expand capacity.

Under the present MPP, import of capital goods gets exemption from customs duty in addition to income tax holiday regime under Section 80-IA to greenfield hydroelectric projects of 500 MW capacities and above and thermal projects of 1,000 MW and above.

... contd.