Government of India
Ministry of Commerce & Industry
Department of Commerce
(SEZ Section)
N.o P.6/3/2006-SEZ.1
Udyog Bhawan, New Delhi
27th February, 2009
Subject: Guidelines for Power Generation, Transmission and Distribution in
Special Economic Zone (SEZs).
The undersigned is directed to say that various issues relating to setting
up of power units and power distribution facilities in SEZ have been under
examination of this Department in consultation with Ministry of Power/
Department of Revenue and Ministry of Law. After due consideration
of the comments/ views received form these Ministries, following guidelines are
hereby laid down:
Generation, transmission and distribution of power in SEZs
(i) Power plant set up by developer/Co-developer
A power plant to be set up by developer/ co-developer in an SEZ as part of
infrastructure facility will be in the non processing area of SEZ and 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. Constituents to whom it
can supply power Such a power plant can supply power to other facilities located
in the non processing area of the same SEZ/facilities located in the non
processing area of other SEZs, SEZ units located in the processing area of the
same SEZ/SEZ units located in the processing area in other SEZs, facilities
located in the processing area of the same SEZ/facilities located in the
processing area of other SEZs and also Domestic Tariff Area (DTA).
(ii) A unit set up within the SEZ
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 the fiscal benefits covered under section 26 of
the SEZ Act including the benefits for initial setting up, maintenance and the
duty free import of raw materials and consumables for the generation of the
power in such plants.
With respect to SEZs in sectors such as IT/ITES, Gem and Jewelry. Biotech,
etc. where a minimum built up area is stipulated under the SEZ Rules and in
respect of which generation of power has been approved by the Board of Approval
as authorized operation to the Developer/Co-developer within the processing
area, in such cases generation of power will be carried out as a unit without
any separate demarcation of the area for that purpose. However, such unit will
maintain separate accounts as a power generating unit. These units will enjoy
duty free import of capital goods, raw materials and consumables for the
generation of power and such duty free imports of capital goods, raw material
and consumables etc. would be counted towards the NFE obligations of the unit.
Constituents to whom it can supply power Such a unit can supply power to other
SEZ Units located in the processing area of he same SEZ/SEZ units located in the
processing area of other SEZs, facilities located in the non processing area of
the same SEZ/ facilities located in the non processing area of other SEZs,
facilities located in the processing area of the same SEZ/ facilities located in
the processing area of other SEZs and DTA.
(iii) A single power plant in an SEZ
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 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. The duty free import 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. Constituents to whom it can supply power. Such a power plant can supply power to the facilities in the non processing
area of the same SEZ/facilities in the non processing area of other SEZs, SEZ
units located in other SEZs and DTA.
Requirement of License
While a generating company may establish, operate and maintain a generating
station without obtaining a license under Electricity Act, 2003 subject
to compliance of the technical standards as specified in the said Act and
conforming to the definition of generating company under the provisions
of the said Act, distribution of power is a licensed activity as specified in
section 14 of the Electricity Act 2003 except the situation specified in the 8th
proviso to the said Section.
Determination of tariff
Tariff of the electricity for any sales within SEZs shall be determined in
accordance with the provisions of the Electricity Act, 2003/ Rules made
thereunder.
Creation of separate entities
Separate entities can be created for generation/transmission and distribution
of power.
DTA clearance/clearance from processing area to non processing area 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 by the regulator and the unit. For such clearance,
the quantity of duty shall be leviable at such rate as may be notified as
customs tariff by the Department of Revenue on the advise of the Ministry of
Power and the Ministry of Commerce, read with Section 30 of SEZ Act, 2005. Such
power plants would ensure maintenance of separate meter for supply of power from
processing to constituents in non processing area or from processing area to DTA
and amount of power so supplied should be submitted to the Unit Approval
Committee for every quarter.
Distribution Licence
In case a power generating plant covered under categories (i) to (iii) as
stated above wishes to obtain distribution license, it may make such an
application to the State Govt. concerned and upon the recommendation of the
State Govt., Deptt. of Commerce will issue necessary Notification under Section
49 of the SEZ Act in consultation with the Ministry of power.
Provided that any State Government can recommend to the Department of
Commerce that any power distribution facility coming up in any SEZ in that State
can be granted distribution license by the Department of Commerce in
consultation with the Ministry of Power. Department of Commerce will issue
necessary notification under Section 49 of SEZ Act.
All the provisions of the Electricity Act, 2003 and Electricity Rules, 2005
as amended form time to time by the Ministry of Power along with various power
resolutions issued by the Ministry of Power will be applicable wherever
warranted to power generating units, whether stand alone or captive power
generating units, transmission facilities and power distribution facilities in
the SEZs.
Sd/-
(Dr. R.K. Mitra) Director