Power projects worth 32,000 Mw in lurch as govt's Mega Power Policy delayed

The revised Mega Power Policy (MPP), which was announced by the Cabinet Committee of Economic Affairs (CCEA) in May this year, is yet to be notified. Close to 32,000 Mw of coal-based power plants are waiting to receive funds totalling Rs 6,500 crore.

The funds are required for duty refund that power developers get on the tax duties they pay for importing equipment. The CCEA extended the time period for thermal power producers to receive 'mega power' certificate to 10 years from the existing five years.

In 2014, the Mega Power Policy identified 25 power plants totalling 32,300 Mw to earn additional benefits under the policy. The incentives provided under the scheme are tax benefits such as lower customs duty and excise duty exemption for equipment procurement. The policy is for over 1,000-Mw projects and was to expire on March 31, 2017.

The department of revenue (ministry of finance) and the power ministry are at loggerheads over the release of funds against the collection of bank guarantees from the power developers.

To avail of the benefit, the power producers need to sign power purchase agreement (PPA) for at least 70 per cent of power generated through competitive bidding and balanced through regulated market. Producers that don't have PPAs or PPAs for the stipulated amount have to submit bank guarantees against the same.

Sources said there was lack of consensus over the modalities of the scheme among the government departments. None of the power producers have received any communication regarding the scheme from the government despite several representations.

Secretary, ministry of power, A K Bhalla did not respond to the queries sent regarding the same.

The government was expecting more competition in the power sector as it will push private companies to bid for power agreements. "This is expected to enable developers to competitively bid for PPAs in future. Increased power availability will boost overall growth of the country and ensure that cost of power to the consumers does not increase," said the government's statement in May 2017.

However, most power developers don't have PPAs due to lack of demand from the states. Due to the financially beleaguered power distribution sector, no state, except two, has come forward to sign any PPA for the past four years. This has impacted power producers who could not avail of the benefits due to lack of power purchase.