12-year plan to ease power crisis
Tribune News Service

NEW DELHI, Nov 6 — In a major announcement to meet the country’s power requirements, the Centre today introduced a 12-year plan titled "Power Vision-2010" having a provision of de facto counter-guarantee for mega power projects.

Presenting the plan for boosting power generation in the country, the Minister of Power, Mr P.R. Kumaramangalam, said "the objectives of this policy are to develop mega sources of power utilising economies of scale with less efforts on project development and obtain lower tariffs, produce power at the most economical locations and transmit to needy areas and add capacity quickly to bridge the large deficits in power".

"We will give power on demand by the year 2010 and put in place a national grid to improve supply", Mr Kumaramangalam said adding that the securitisation procedures to retrieve the colossal dues from the state electricity boards (SEBs) would soon be placed before the Union Cabinet.

The Ministry has also proposed a cess on generation to be used for power sector development as a part of its blueprint which has a target of capacity addition of 80,000 MW over the next 12 years besides creation of a transmission and distribution network, the Minister said.

A Bill for cess would be introduced in the winter session of Parliament and it could be operational by the next Budget session, Mr Kumaramangalam said adding that two third of the collected money would be diverted to states for improving thermal power generation. The remaining one-third would be kept aside for development of hydel sector, he said declining to divulge full details of the proposed cess.

The Minister further clarified that the earlier proposal of imposing a cess on consumer for hydel power development was now being changed into a levy of generation as the government desired to provide cheapest possible power for which tariff structure was also being rationalised.

A counter-guarantee is being extended to mega power projects, Mr Kumaramangalam said adding that a tripartite agreement would be signed between the Reserve Bank of India, Power Trading Corporation (PTC) and the state governments to ensure payment to power projects and the corporation.

According to the agreement, outstanding dues from the defaulting states to PTC would be set off against their plan outlays and devolving funds from the central pool.

"The PTC would be set up with majority equity participation by Powergrid, alongwith NTPC, Power Finance Corporation, and other financial institutions", the Minister said.

The immediate strategy was to remove procedural bottlenecks, speed up completion schedule of the ongoing projects and start work on projects cleared by the Central Electricity Authority (CEA), the Minister said.

Dwelling on mega power projects, the Minister said that in the public sector, the NTPC would be setting up projects of about 7000 mw on coal and 5200 mw on gas. The Maithon project would also be established as a mega project, he said adding that the NHPC would set up five projects with a capacity of about 3100 mw.

In the private sector, three projects of 4500 mw are proposed to be set up using domestic and imported coal and one project of 1000 mw based on LNG, Mr Kumaramangalam said. Two or three more projects based on LNG could be considered later. The Hirma project in Orissa of 3960 mw would be developed as a mega project, once the issue regarding 12 per cent free power was satisfactorily resolved, the Minister said.

Import of capital equipment would be free of custom’s duty, the Minister said listing the set of incentives. A 15 per cent price preference and deemed export benefit for domestic bidder is also being offered, he said adding that the projects would also have income tax exemption for any 10 years during the first 15 years. Sales tax and local levies exemption on supplies being made to Mega projects would also be available, he said.

The PTC would purchase power from the private projects and sell these to the identified SEBs. Security to the PTC would be provided by means of letter of credit and resources to the state’s share of the central plan allocations and other devolution.

This would reduce IPP risks, the Minister said adding that all these measures would substantially reduce tariff of generating companies in both public and private sectors. This in turn would give much needed relief to SEBs and consequently to consumers, he said.

A pre-condition to this , would be that the beneficiary state should have constituted their regulatory commissions with full powers to fix tariffs as envisaged in the Central Act. They would also have to privatise distribution in the cities having a population of more than one million. Similar incentives would be given to public sector projects. They, however, would deal directly with the SEBs and not with the PTC.

Regarding the Energy Conservation Bill, Mr Kumaramangalam said that it was being finalised and would be tabled in the Parliament soon. This includes a system of incentives for encouraging conservation of energy and the institutional mechanism for implementing the energy conservation policy.

The introduction of availability tariff for optimal load management was another priority. Trial runs for this have already been completed and final instructions will be issued shortly, the Minister said.