The Union power ministry’s attempts at bringing merchant and captive power plants under the purview of a modified mega power policy has hit a roadblock.
Captive, merchant plants not under mega power policy purview, for now
NEW DELHI: The Union power ministry’s attempts at bringing merchant and captive power plants under the purview of a modified mega power policy has hit a roadblock with the ministry of finance and the Planning Commission. The policy entitles power plants to fiscal and other incentives.
Sources told DNA Money that there were differences between the ministries of finance and power on the mode of sale of electricity from captive power plants (CPP) and merchant power plants (MPP).
Besides, the ministry of finance is insisting that the new policy should not do away with the requirement of privatisation of distribution network in states where plants covered under the policy are located.
The mega power policy was introduced in 1995 for promoting large power plants that are more fuel-efficient and environment-friendly, though it underwent several amendments.
The power ministry has been planning to revisit the mega power policy for some time now, to push capacity addition on the generation side during the Eleventh Five Year Plan.
It had even set in motion the process of cabinet approval. Sources, however, claimed that there were now attempts within the ministry of power to announce the policy without going through the motions involved in the cabinet clearance.
If this happens, it could either mean that the policy has been announced just with an eye on public goodwill and the fiscal incentives intended for CPPs and MPPs would only be in the realm of discussion since the ministry of finance was not on board.
“There is a general reluctance on the part of Union finance ministry to give tax relief to the industry, even if it is infrastructure, since it favours a transparent subsidy mechanism through budgetary support over fiscal concessions,” a senior official said.
A senior official in the Union government added that the proposed inclusion of CPPs and MPPs within the policy’s purview without fiscal incentives translating to cheaper power for consumers would lead to only promoters making more profit.
MPPs can losely be described as those that are not bound by any long-term power purchase agreement for sticking to tariff and, therefore, can sell or trade electricity at market rates.
CPPs, on the other hand, are those set up by consumers like the steel and the cement industry, which have huge requirement for electricity for their own use.
CPPs are also allowed to sell excess power to other users through distribution companies.
The finance ministry wanted that since other beneficiaries of the policy were entitled to concessions only if they put up their plants after offering cheapest electricity under a tariff-based bidding, CPPs and MPPs should also either adhere to the condition or sell power directly in the market under open access or on power exchange or in the short-term market.
jyoti_m@dnaindia.net
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