Policy

Policy Incentives

  • 100 percent foreign equity participation is allowed under the automatic approval route in all segments of the industry (except atomic energy).
  • Generation and distribution power projects of any type and size are allowed
  • De licensing of Generation except Hydropower
  • No license for Dedicated lines & Distribution in Rural Areas
  • Transmission Open Access
  • The electricity act 2003 allows trading in power and provides for further deregulation.
  • Distribution Open Access in Phased Manner
  • Appellate Tribunal Operational since July 2005
  • A renewable license period of 30 years has been set.
  • Return on equity up to 16 percent is assured at 68.5 percent PLF for thermal power plants. Similar incentives are provided for hydroelectric power projects.
  • Import duty at the concessional rate of 20 percent has been set for import of equipment.
  • The government allows a 5-year tax holiday for power generating projects with an additional five years in which a deduction of 30 percent taxable profits is allowed.
  •  Transparency & Competition in procurement of services
  • Encouragement to Captive Power Plant including Group Captives.
  • Trading of Power – a distinct activity
  • Institutional Framework – Independent Regulators
  • Focus on Renewable Sector – Minimum Purchase Obligation

 
Policy Framework
Electricity Act 2003
Electricity Act 2003 has been enacted. The objective is to introduce competition, protect consumer's interests and provide power for all. The Act provides for National Electricity Policy, Rural Electrification, Open access in transmission phased open access in distribution, mandatory SERCs, license free generation and distribution, power trading, mandatory metering and stringent penalties for theft of electricity.
It is a comprehensive legislation replacing Electricity Act 1910, Electricity Supply Act 1948 and Electricity Regulatory Commission Act 1998. The aim is to push the sector onto a trajectory of sound commercial growth and to enable the States and the Centre to move in harmony and coordination.
The Electricity Act 2003 has had a positive effect on the entire sector, including generation. Overall, this legislation has liberalized generation and freed it from licensing. The requirement of techno - economic clearance has also been removed. In addition, the recently announced National Tariff Policy makes it mandatory that all future requirements of power should be produced through a competitive bidding mechanism instead of cost-plus route.
The positive environment created by the electricity act and the proactive role-played by the Ministry of power in helping private projects achieve financial closure have led to a revival of the IPP model.

Ultra mega coal based power projects
Seven ultra mega coal based power projects with a capacity of 4000 MW each in the first phase are on the anvil. These projects will be set up at Sasan in Madhya Pradesh, Mundra in Gujarat, Akaltara in Chhattisgarh, Karvar in Karnataka, Ratnagiri in Maharashtra, Krishnapatnam in Karnataka, and in Orissa. For the Orissa project, three sites- Hirma, Derabahai and Bhashma have been short-listed.
The initial development work (land acquisition, water linkage, EIA studies, preparation of project report, etc.) is being done through SPV companies, with initial funding provided by the Power Finance Corporation (PWC). Each company will be a fully owned subsidiary of PFC. These projects will be awarded on the basis of competitive bidding. The bidding will be based on the first year of tariff quoted. The projects will be transferred to the investors by the end of 2009. These projects will entail a total cost of Rs. 750 billion. They are likely to be financed at debt-equity ratios of 70:30. The cost of power from these projects is estimated to be about Rs. 2.00- 2.75 per unit.

Nuclear deal
The recent Indo-US nuclear deal makes nuclear deal makes nuclear power a much more realistic option for the future. The centre has given approval for the construction of eight new nuclear reactors with a combined capacity about 6,800 MW.
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National Electricity Policy
Objectives
The National Electricity Policy aims at achieving the following objectives:

  • Access to Electricity - Available for all households in next five years.
  • Availability of Power - Demand to be fully met by 2012. Energy and peaking shortages to be overcome and adequate spinning reserve to be available.
  • Supply of Reliable and Quality Power of specified standards in an efficient manner and at reasonable rates.
  • Per capita availability of electricity to be increased to over 1000 units by 2012.
  • Minimum lifeline consumption of 1 unit/household/day as a merit good by year 2012.
  • Financial Turnaround and Commercial Viability of Electricity Sector.
  • Protection of consumers’ interests.

Issues Addressed
The policy seeks to address the following issues:

  • Rural Electrification
  • Generation
  • Transmission
  • Distribution
  • Recovery of Cost of services & Targetted Subsidies
  • Technology Development and Research and Development (R&D)
  • Competition aimed at Consumer Benefits
  • Financing Power Sector Programmes Including Private Sector Participation
  • Energy Conservation
  • Environmental Issues
  • Training and Human Resource Development
  • Cogeneration and Non-Conventional Energy Sources
  • Protection of Consumer interests and Quality Standards

Source:Power mistry websites,newspapers