Standalone SEZs for power ?

Standalone SEZs for power on the cards

Deepak Joshi, Hindustan Times
New Delhi, September 05, 2007

The government is taking a fresh look at the issue of standalone special economic zones (SEZs) for power generation projects. The move follows concerns regarding the utilisation of SEZ-generated power in the non-processing areas and domestic tariff area (DTA). A power ministry official admitted that though the Electricity Act provides for power generation for captive purposes on individual or collective basis, the concept of standalone power SEZs needs examination.

A key issue calling for policy intervention is the creation of a level-playing field for National Thermal Power Corporation and other power plants servicing the domestic tariff areas. “A formula needs to be worked out for payment of duty on such supplies outside the SEZ processing area,” the official said.

The issue gains significance, as it is the responsibility of the developer to provide power as an infrastructure facility. The Maharashtra Industrial Development Corporation decided that instead of setting up individual power generation facility in each SEZ, they would set up two power sector SEZs to supply power to all such zones. Other two sector-specific SEZs in Gujarat were allowed, as the location proposed was not contiguous to the main SEZ.

SEZ developers get exemption on building material, capital goods and operation and maintenance of goods and services. In such a scenario, it is pointed out that the size of the power plant should be linked to the SEZ requirements.

To overcome these issues, the power ministry has proposed three possible alternatives. The units in the SEZ could create a captive power plant on contributory basis and use the power generated. This would not require any distribution licence or fixation of tariff. Alternatively, a cooperative society of users could develop the power plant. Or the SEZ developer could take the distribution licence and get the tariff fixed from the regulator.
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