SEZs to get leeway in power distribution

SEZs to get leeway in power distribution
The Financial Express, August 25, 2009, Page 3

Rituparna Bhuyan, New Delhi

In a move to ease procedural hassles, the commerce ministry is pushing for removal of licensing requirements needed to distribute power to factories, business outsourcing units, software developers and social infrastructure like hospitals and malls located inside Special Economic Zones (SEZ).

The power and commerce ministry are in the advanced stages of inter-departmental talks that would lead to doing away with the requirement for obtaining licences for distributing power inside Special Economic Zones.

“We hope to present the proposal for Parliament's approval in the winter session,” said DK Mittal, additional secretary, department of commerce at a meeting a seminar organised by IIM Ahmedabad, Centre for Infrastructure Policy and Regulation and Indian Infrastructure.

However, a SEZ developer will have to obtain a licence if it wants to distribute power outside the zone.

The proposed move will help in cutting down the long-drawn licensing requirements needed for obtaining a licence for distribution of power and will help companies like the Mundra Port, promoted by Adani group, and SEZ Ltd and scores of other SEZs, which are on their way of becoming operational.

“The proposed move will mean that the moment a SEZ gets notified, the developer will get a deemed licence status to distribute power to the units and other supporting infrastructure inside the zone,” said Pankaj Modi, head, SEZ and planning, Mundra Port and SEZ Ltd.

The commerce ministry had released guidelines on generation and distribution of power in SEZs on February, 2009. Though it spelt out norms for building power plants inside the tax free industrial enclaves meant for exports, the guidelines maintained that the developer will have to obtain a distribution licence, as mandated by the Electricity Act of 2003.

At present, there are 98 functional Special Economic Zones housing 2279 units while scores of other zones are likely to start exporting by the end of this year, in spite of the global slowdown. Uninterrupted power and a state of the art distribution network are crucial to make SEZs lucrative to prospective clients.

To ensure that the units get uninterrupted supply, the developers either build power plants or have to buy power from other distribution networks. For example, Mundra SEZ, which is being developed in over 6,000 hectares— currently the largest SEZ—will host a 4,629 mw power plant in side the zone, which will not only supply power to the units located inside it, but also to grids located outside.

At present, Mundra has completed construction of a 330mw unit in the power plant.

Reliance Utilities Ltd, which partnered Reliance Jamnagar Infrastructure Ltd in building the Jamnagar-based Special Economic Zone refinery, has already built a 720mw plant inside the zone.