Power ministry objects to clauses on plants in SEZs

SANJAY JOG
Posted online: Monday, October 16, 2006 at 0000 hours IST

MUMBAI, OCT 15: The Maharashtra government, which is currently involved
in pacifying opponents of the upcoming 45 special economic zones (SEZ)
on the issue of land acquisition, has received yet another setback as
the power ministry has raised a series of objections on the provisions
of development of power projects and sale of power in and outside these
SEZs.
The ministry has forwarded its comments on the Maharashtra Special
Economic Zones and Designated Areas Bill, 2006, in the light of the
Electricity Act, 2003, government sources confirmed.

A
As per the state SEZ Bill, each SEZ developer is expected to set up
power projects to meet the demands of units in the SEZ.

The Mukesh Ambani controlled Reliance Industries has proposed the
development of a 2,000 MW power project in the MahaMumbai SEZ. Moreover,
a city-based developer, who has received approval for the development of
a SEZ on well over 2,000 hectares near Vasai in Thane district, has
planned a 500 MW power project, government sources informed.

The SEZ Bill says, “Any person generating electricity in the Special
Economic Zone or Designated Area may supply electricity to any State
Electricity Distribution Company or Corporation and any other generator
of electricity including Central Power Supply Undertakings (CPUs), with
the approval of the state government and subject to such terms and
conditions agreed by such Supplier and any State Electricity Company or
Corporation and any other generator of electricity including Central
Power Supply Undertakings (CPUs)”.

However, the power ministry observed that a State Electricity
Distribution Company is regulated by the state electricity regulatory
commission (SERC). Therefore the approval of the State Government is
inconsistent with the Electricity Act 2003.

Moreover, the Electricity Act, 2003 has already de-licensed generation
and a generating company is free to supply electricity to any licensee
or to a consumer subject to regulation of the SERC.

Therefore no approval of the State Government is required for such a
sale. Central undertakings would not be able to purchase electricity
unless they have taken a trading licence because it is understood that
these generating companies would ultimately sell the power and the
Electricity Act 2003 requires a trading licence for purchasing
electricity for resale.

On the provision regarding power supply to other SEZs of the designated
area, the ministry commented that, “A licensee (including a deemed
licensee) under the Electricity Act 2003 has a well-defined area of
supply in which he has universal supply obligation. Therefore, a
generating company cannot be deemed licensee for supplying electricity
for a loosely defined area” and due to the limitation of the state
legislation of not being able to provide sale of electricity outside the
state, this clause is not required.

On use of the transmission and distribution network of CPSUs or other
distribution companies for sale of power outside Maharashtra, the
ministry said that the SERC has jurisdiction for that state and,
therefore, this provision cannot be sustained in law, thus this clause
is required to be deleted.

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