Centre may amend SEZ rules allowing standalone power plants to export

Amiti Sen New Delhi | Updated on January 02, 2019

The Adani Group reportedly signed a power purchase agreement with Bangladesh in November 2017 to export from its Jharkhand plant   -  Reuters

Move likely to benefit Adani Power; Board of Approval to consider proposal next week

In a move that could benefit Adani Power, which is interested in exporting power to Bangladesh from its proposed plant in Jharkhand, the government is likely to change its guidelines for special economic zones (SEZs) allowing standalone power plants, exclusively meant for exports, to operate in the enclaves.

“The Commerce Department’s suggestion to make amendments in its power guidelines for SEZs will be examined by the Board of Approval (BoA) for SEZs next week. If the BoA approves, necessary changes will be made to the guidelines,” a government official told BusinessLine.

Allowing power plants to come up as an SEZ unit would make them eligible for all tax benefits extended to such units.

While the power guidelines for SEZs, which were first framed in 2009, allowed setting up of standalone power plants in SEZs in the processing area, the amendment in February 2016 stipulated that no single standalone power plant will be permitted to be set up in an SEZ in which there would be no other units.

“Subsequently, this office has also received an application from Adani Power Ltd for setting up a standalone plant as an SEZ in Jharkhand for export of the entire power produced to Bangladesh through a dedicated transmission line.

“However, the extant power guidelines do not allow setting up of such standalone plants in an SEZ that could export power as provided under Ministry of Power guidelines on cross-border trade of electricity dated December 5, 2016,” the Commerce Ministry pointed out in its proposal to the BoA. The BoA meeting is scheduled on January 9.

Tweak in guidelines

Adani Power’s proposal for setting up a sector-specific SEZ for power at Godda district, Jharkhand, over 425 hectares, therefore, had to be rejected by the BoA in its meeting in February 2018 on the ground that it was inconsistent with the guidelines. The DoC has now proposed to replace the paragraph in the present power guidelines disallowing standalone plants with a paragraph stating that standalone plants exclusively meant for export will be permitted and can be operated as a unit subject to all obligations and benefits available to SEZ units.

“The proposed amendment in the guidelines will be an enabler to allow power plants for export purposes as envisaged in the new guidelines issued by the Ministry of Power. Further, there will be no option for selling any surplus power in the domestic tariff area as the entire power will have to be exported or consumed within SEZ…”, the submission to the BoA stated.

The present proposal for policy amendment has been deliberated with the various stakeholders, including the Ministry of Power, Ministry of External Affairs, Department of Revenue and Jharkhand, the submission added.

The Adani gGroup, reportedly, signed a long-term power purchase agreement with Bangladesh in November 2017 to for supplying power from its plant in Jharkhand.

Published on January 02, 2019

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