Private Sector Investment in Power Sector

powerThe share of private sector investment in new capacity addition has increased from 9.1% in the 10th Plan to 41.9% in the 11th Plan. As per extant policy, Foreign Direct Investment (FDI) up to 100% is permitted in power sector, under the automatic route for generation, transmission and distribution.

Recently, the Government has liberalized the FDI policy for Power Trading Exchanges. Foreign Investment in power exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 allowed up to 49% through automatic route.

Details of private sector investment from 2009-10 to 2012-13, based on information available with Central Electricity Authority (CEA), are as below:

(in Rs. crore)

Year

2009-10

2010-11

2011-12 (P)

2012-13 (P)

Total

48132.04

81853.88

98283.23

54953.02

Moreover, the Union Budget enumerates Government’s efforts to promote private investment. Some of these include:

  • India Infrastructure Finance Co. Ltd provides long-term financial assistance to infrastructure projects through take-out finance, re-finance of bank loans and credit enhancement.

  • Investment in tax-free long-term infrastructure bonds was permitted since 2010-11 and continues in a limited fashion in 2013-14.

  • The ceiling of foreign institutional investment in corporate infrastructure bonds of over   5-year maturity has been enhanced to US $25 billion in 2011-12.

  • ECBs can be raised for investment by imports of capital goods, new projects, modernization and expansion of existing production units.

  • The sunset date to claim 10-year tax holiday for power projects has been extended to March 31, 2014.

  • Infrastructure Debt Funds have been launched to raise resources.
  • A Cabinet Committee on Investment monitors investment proposals and projects under implementation.

  • 15% investment allowance is allowed to be deducted by companies investing over Rs.100 cr. in plant and machinery during 2013-15.

Government of India has also taken a number of legislative, policy and administrative measures to enhance private participation in the power sector. Some of these measures in the last few years have been:

i.      Enactment of new Electricity Act, 2003.

ii.      De-licensing of thermal generation. Further captive generation is freely  permitted.

iii.      Formation of Central & State Regulatory Commissions

iv.      Development of National Grid.

v.      Open Access in Transmission & Distribution

vi.      Power trading being recognized as a distinct activity.

vii.      Issue of guidelines for competitive bidding for procurement of Power by distribution licensees under the Electricity Act.

viii.      Notification of Tariff Policy

ix.      Notification of National Electricity Policy

x.      Notification of the Hydro Policy, 2008

xi.      Ultra Mega Power Plants (UMPP) initiative

This information was given by MoS (I/C) Power Sh. Jyotiraditya M. Scindia in a written reply in the Rajya Sabha today.

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