Ahead of the Vibrant Gujarat Global Investors' Summit to be held at the Science City near Ahmedabad on January 12-13, the state government has come out with a new power generation policy.

It aims at encouraging private participation, promoting efficient and environment-friendly technologies in power generation and ensuring competitiveness in the power sector.

The government has also made it clear that it is not in favour of providing fiscal incentives to private players, and private project developers will only play the role of a "facilitator" under the new power generation policy.

The policy will assist them in obtaining fuel linkage and creating infrastructure for setting up new power projects in the state.

Under the new policy, the government has reserved the right to purchase power from the power projects up to 10 per cent of the installed capacity at variable cost. The cost will be worked out as per the Regulatory Commission's norms, if a private developer has arranged his own fuel without government recommendation.

Where a developer has arranged fuel for his power project on the recommendation of the government, either in the form of fuel allocation/linkage or of mining block, the government will have the first right to purchase power up to 20 per cent of the installed capacity of this project at variable cost.

The policy further states that where fuel is supplied from the coal mines/block allocated to government PSU or its joint venture PSU, the project developer will offer 20 per cent of the installed capacity at variable cost, and 50 per cent of the installed capacity through competitive bidding. This provision will be applicable for projects situated outside the state also.

The government will also have the first right to purchase surplus power from power projects set up in the Special Economic Zones with installed capacity up to or more than 1,000 MW.

When surplus power is available for shorter duration of one year or lesser period, the government through its nominated agency may purchase it on a short term basis at the mutually negotiated price. When surplus power from SEZ projects is available for longer duration of more than one year, the government will have the first right to purchase it through competitive bidding process.

The mandates of the policy are applicable to independent thermal power projects set up by a private developer with an installed capacity of over 200 MW at a single location.

The plant may be based on gas/imported coal/coal/washed coal/lignite among others. Only those projects, for which PPAs (power purchase agreements) have not been signed on the date of issuance of Government Resolution (GR), will not be covered under this policy.

The GR was issued on Janaury 2, 2009.

The government will also facilitate and assist the private project developers to identify suitable location for the project, creation/upgradation of connecting infrastructure to the project site, arranging the Right of Way and water supply, obtaining fuel and port linkage, and finally clearances and approvals which are the purview of the state.

A developer intending to set up an independent/captive power plant(s) under this policy will be required to enter into an MoU with the state Energy Department, or its nominee. A special task force headed by the principal secretary (Energy) will regularly monitor the implementation of the project.

Under the policy, the developer will be responsible for acquisition of land for the project, and the government land, wherever required, may be made available at the rate decided by the appropriate authorities.