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| India Infoline Sector Reports | Wed, 18-Feb-2004 16:50:28 IST (GMT+5:30) | |
| Power | ||
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Independent Power Projects (IPPs) To meet the growing shortage of power, the government sought to encourage private (including foreign) participation in the power sector. The policy permits 100 per cent foreign owned companies to set up power projects of any capacity and type (coal, gas, hydel, wind or solar). It allows them to repatriate profits and also provide for liberal capital restructuring with attractive rate of return. An IPP, after getting government approvals for its specified plant size, can generate power and sell it to the respective SEB under a Power Purchase Agreement (PPA). If an IPP wishes to increase plant capacity, a new PPA has to be signed. For list of approvals, click here IPPs are entitled to earn a return of 16% on equity at a PLF of 68.5%. Above this level, IPPs can earn up to 0.7% for every 1% increase in PLF. It has been also decided to accord automatic approvals for foreign equity upto 74% in the (a) Generation and transmission of electric energy produced in hydro-electric power plants and coal/oil/gas based thermal power plants. (b) Non-conventional energy generation and distribution. (c) Construction and maintenance of power plants Government of India had agreed to extending a counter guarantee for payment obligations of SEBs to promoters of 8 designated fast track projects - gvk (Jegurupadu), dabhol, mangalore Power, spectrum, aes Ib Valley, central India Power Company, hinduja National Power Corporation and st-cms. Of these, only GVK and Spectrum has started supplying to the grid. Despite the over-whelming interest of private sector for setting up power generation projects, most of the projects are stuck up at the financial closure stage mainly because the consumer - the SEB is financially weak. There are over 17400MW of private power projects which have been cleared by the CEA but are languishing for want of funds. In 1998, the government announced the mega power policy where designated projects in the private and government sector exceeding 1000MW capacity could sell power to more than one state through the Power Trading Corporation. These projects were extended a host of tax concessions and zero duty import of equipment. Click for list of mega projects These projects have also failed to take off because although the sale of power is routed through PTC, the final consumer will be various SEBs. For profile of important IPPs, click here |
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