New Guidelines for Power Generation in SEZs

[Ref: No. P.6/3/2006-SEZ dated 21st March 2012]

Subject: Guidelines for Power Generation in Special Economic Zones.

In supersession of this Ministry’s letter of even number dated 27th February, 2009 laying down guidelines for power generation, transmission and distribution in Special Economic Zone, the following guidelines are hereby prescribed:

1.    Generation of Power in SEZ

(i)   A power plant can be set up by developer(s)/co-developer(s) in a SEZ, as part of infrastructure facility in the processing area or non-processing area of SEZ. Such a power plant setup in the processing area will be entitled to all benefits available to developers/co-developers, including fiscal benefits under Section 26 of the SEZ Act, 2005 including benefits for initial setting up, duty free imports of raw materials, components and consumables for operation and maintenance of power plant and generation of power. Similarly all obligations and responsibilities of a developer/co-developer under the Act and Rules etc shall be applicable. There will be no obligation to achieve positive Net Foreign Exchange Earning (NFE) for such power plants. However, a power plant to be set up by developer/ co-developer in an SEZ as part of infrastructure facility in the non processing area of SEZ will be entitled to fiscal benefits only for its initial setting up and no fiscal benefit would be admissible for its operation and maintenance in terms of Rule 27(3) of the SEZ Rules. There will be no obligation to achieve positive Net Foreign Exchange Earning (NFE) for such power plants.

(ii)  As a unit set up within the SEZ

(a)  A unit can be set up within the SEZ to generate power as a product or have a captive power plant and will be located in the processing area. Such a power plant will be entitled to all benefits available to unit, including the fiscal benefits covered under Section 26 of the SEZ Act including the benefits for initial setting up, maintenance and the duty free imports of raw materials and consumables for the generation of the power in such plants.

(b)  The duty free import of capital goods, raw material and consumable etc. would be counted towards the NFE obligations of the unit as applicable to such units under Rule 53 of the SEZ Rules, 2006.

(c)  All obligations and responsibilities of a unit under the Act and Rules etc shall be applicable.

(iii)  A single power plant in an SEZ

(a)  A single stand alone power plant can be set up in an SEZ in which there would be no other units. Such a power plant will be treated as a unit in the processing area and will be entitled to all benefits available to a unit, including the fiscal benefits covered under Section 26 of the SEZ Act including benefits for initial setting up, maintenance and the duty free imports of raw material and consumables for generation of power in such a plant.

(b)  The duty free imports of capital goods, raw material and consumables etc. would be counted towards the NFE obligation of the unit as applicable to such units under Rule 53 of the SEZ Rules 2006.

(c)  All obligations and responsibilities of a unit under the Act and Rules etc shall be applicable.

2.    Transfer of surplus power to DTA etc.
The developer/co-developer/SEZ unit as the case may be, can transfer the surplus of the power generated in their power generation plants stand alone or captive plants, in excess of the requirement of the SEZ, to DTA. However, such a developer/co-developer/SEZ unit power plant shall have to make an application for sale of surplus power to DTA to the Development Commissioner and will have to pay duty as applicable on import of such power. The Development Commissioner concerned may examine the request for sale of surplus power to DTA in consultation with the appropriate agencies as may be required under the Electricity Act, 2003 and rules made there under wherever considered necessary.
3.    Constituents to whom power may be supplied:
Such a power generation infrastructure facility I unit can supply power to:
(a)  SEZ Units located ¡n the processing area of the same SEZ
(b)  SEZ units located in the processing area of other SEZs,
(c)  Facilities located in the non processing area of the same SEZ
(d)  Facilities located in the non processing area of other SEZs
(e)  Facilities located in the processing area of the same SEZ
(f)  Facilities located in the processing area of other SEZs and
(g)  Domestic Tariff Area.
4.    Distribution of Power
3.1  While a generating station may be established, operated and maintained without obtaining a license under Electricity Act, 2003 subject to compliance of the technical standards as specified ¡n the said Act and conforming to the definition of the generating company under the provisions of the said Act, distribution of power is a licensed activity except as otherwise specified in Section 1 4 (read with Section 1 3) of the Electricity Act, 2003.
3.2  In terms of 5.0. 528(E) dated 3rd 2010, the Developer of a Special Economic Zone notified under Sec 4(1) of the SEZ Act, 2005 shall be deemed to be a licensee for the purpose of clause (b) of Sec 14 of the Electricity Act, 2003 i.e. to distribute electricity as a distribution licensee.
5.    Supply of Power and duties thereon:
In respect of power supplied from processing area to constituents in non-processing area or from processing area/non processing area to DTA, it should be at such a price as agreed to between the relevant regulator and the power supplier (developer/co-developer/unit). For such clearance, the quantum of duty shall be leviable at such rate as may be notified as customs tariff by the Department of Revenue in consultation with the Ministry of Power/prescribed power sector regulatory agencies and the Ministry of Commerce, as prescribed in Section 30 of SEZ Act, 2005. Such power plants would ensure maintenance of a separate meter for supply of power from processing area to constituents in non-processing area or from processing area/non processing area to DTA and details of power so supplied should be submitted to the Development Commissioner on a quarterly basis.
6.    Applicability of Electricity Act, 2003 and Electricity Rules made thereunder
All the provisions of the Electricity Act, 2003 and Electricity Rules, 2005, as amended from time to time by the Ministry of Power along with various power resolutions issue by Ministry of Power will be applicable to generation, transmission and distribution of Power whether stand along or captive power.
This has the approval of Hon’ble CITM.