In an effort to attract private investment in the power sector, the Union Cabinet on Thursday made major changes in the Mega Power Policy under which States controlling the power distribution system would be allowed to purchase power from mega power units in a bid to encourage such projects.

The States would have to give an undertaking to carry out distribution reforms as laid down by the Ministry of Power, which mandates privatisation of distribution in the future, according to changes approved by the Cabinet.

The Cabinet also decided to remove the condition requiring inter-State sale of power for getting mega power status. Earlier, only those projects which had inter-state power sale agreements were granted mega power status. The Cabinet also decided to extend the benefits of mega power policy to the supercritical power projects to be awarded through the international competitive bidding (ICB) route with the mandatory condition of setting up indigenous manufacturing facility.

Level-playing field

Providing a level-playing field to private players, the government also mandated in the policy that the 15 per cent price preference available to the domestic bidders in the case of PSU projects would not apply to tariff-based competitive bid projects of these State-run companies. However, the present dispensation of 15 per cent price preference available to the domestic bidders in the case of PSU projects would continue.

The Cabinet also decided to set up a committee under the Planning Commission with the Department of Heavy Industries, Ministry of Power and Department of Revenue for suggesting modalities to take care of the disadvantages suffered by the domestic industry related to the power sector.

Under the policy, existing power projects have been allowed to import equipment for brownfield expansion at a basic custom duty of 2.5 per cent. Such expansion of existing projects would enjoy all other benefits available to greenfield mega power projects.

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