Fiscal incentives under the mega policy should be linked with timely completion of hydro projects and award of contracts through international competitive bidding (ICB). The power ministry said this on Wednesday while commenting on the Hydro Policy 2008.
Fiscal incentives on the basis of installed capacity need to be reconsidered. In case of hydro power projects, the way to promote efficiency and quick capacity addition would perhaps not be best served by putting a threshold qualifying capacity but by ensuring that the development of the project takes place in the most efficient, cost effective and time bound manner, the ministry argued.
For availing benefits under the Mega Power Policy, the Central Electricity Authority (CEA) concurrence, Power Purchase Agreement (PPA) and financial closure are produced before the appropriate regulator. The project is thereafter completed in the time frame laid down by the regulator.
Large percentage of the total cost of a hydro project attributes to civil works, which are presently not eligible for incentives like zero custom duty import and deemed exporting benefits. Therefore, the import of civil construction machinery should also be made eligible for fiscal benefits.
Also, it should be ensured that storage or multipurpose projects are not converted into run-of-river schemes to offset the cost disadvantage faced by multi-purpose projects.
It is so because only a small portion of the cost is apportioned to non-power components like drinking water, irrigation and flood moderation, while the risks associated with these are disproportionately larger, the ministry noted. Multi-purpose projects of all capacities would be eligible for fiscal benefits under the Mega Power Policy. The new policy has been unveiled in January to promote more investments by the private sector in the hydro sector .to tap about 1,50,000 mw of potential.