Faced with an alarming power shortage and a dismal track record of failing to add new capacity as per targets year after year, the Union Power Ministry, for the first time in a decade, has proposed to radically reform its Mega Power Policy.

Under this, it plans to remove all preconditions — save for competitive tariff bidding and price preference for domestic bidders — that are customary for setting up mega power projects (minimum of 1,000 MW in fossil fuel-fired and 500 MW in hydroelectric).

Although an addition of 78,700 MW was targeted for the 11th Five Year Plan (2007-12), a capacity of only 15,074 MW has been commissioned until June 2009.

According to the new proposal, obtained by The Sunday Express, no longer will a project developer have to sign up its long-term buyers — one of the key reasons identified for delays — to begin construction. All it would need is to submit a bond pledging that it would have the long-term power purchase agreements (PPAs) in place before electricity starts flowing from the project.

That’s not all.

• As per existing norms, the project developer has to tie up the sale of the entire generation (100%) with state utilities to achieve financial closure and start work. As per the new proposal, the PPA tie-up with a state utility will be limited to 85% of the capacity for thermal and 60% for hydroelectric plants — allowing the developer to sell the balance power at commercial rates.

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