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                STATE POLICY FOR THE DEVELOPMENT OF SMALL HYDRO POWER IN J&K


                                    (Government order No: 211 - PDD of 2003 dated 09 - 10 - 2003)

SCOPE AND OBJECTIVES OF SMALL HYDRO POWER DEVELOPMENT IN JAMMU & KASHMIR:

1.1    Jammu & Kashmir has a hydropower potential of the order of 20,000 MW against which only about 1500 MW has been harnessed so far. The Government of Jammu & Kashmir (GOJK) has decided to encourage generation of power through small hydropower sources of energy and has framed a policy so that the development of this sector serves as an engine to achieve the objective of promoting the all-round development of the region.

2.    OPERATIVE PERIOD AND PARTICIPATION:

2.1    This policy shall be in operation from the date of its publication as notified by the Government Order. All projects awarded under this policy will be governed by this policy for their entire duration.

2.2    All Hydropower projects / stations estimated to have an installed capacity of up to 25 MW and as notified by the Jammu & Kashmir State Power Development Corporation (J&KSPDC) from time to time shall be eligible under this policy.

2.3    Jammu & Kashmir Government invites any non-GOJK agency to bid for identified projects for the development of this sector. These will be termed as Independent Power Producers (IPP). This would include any of the private sector entities, central power utilities, state governments or any other government entities and their joint ventures.

3.    PREQUALIFICATION:

3.1    There shall be a pre-qualification by the GOJK of the bidders for the projects in the State based on (a) financial capacity to mobilize the required resources and bring in or raise their equity contribution; and (b) past experience with development, construction and operation of hydro projects or other power sector experience. The applicants will be graded and listed based on the balance sheets, annual reports and other reported evidence of financial and technical capacity.

3.2    The weightage to be given to financial capacity, technical capability, past experience and other relevant attributes of the applicants, the sub-categories of these attributes to be evaluated and their inter-se weightage, the guidelines for evaluation and the passing score on attributes/in aggregate required for pre-qualification shall be specified in the bid documents inviting bids for pre-qualification.


4.    PROJECTS:

4.1    The projects available for development with indications of estimated capacities, and for which development of pre-feasibility studies is in progress shall be notified by the J&KSPDC from time to time.

4.2    The J&KSPDC will undertake to prepare the pre-feasibility studies in a time bound manner. The evacuation requirements including details of nearest sub-station will be specified in the pre-feasibility studies.

4.3    The projects shall be offered for a period of forty years from the date of the award at the end of which they shall revert to the Government of Jammu & Kashmir or extended further on mutually agreed terms, as per the decision of the Government of Jammu & Kashmir.

4.4    The private land, if any, required for the project shall have to be acquired by the IPP at their own cost. If it is Government land, it will be given on lease for a period of 40 years. All necessary assistance in this regard will be provided by the Power Development Department/Corporation. The construction of approach roads, water and power supplies etc. shall be the responsibility of the IPP.

4.5    In case of canal fall schemes, the availability of water in the canal will be subject to irrigation demand and the IPP does not have any right for additional water for power generation. The decision of Irrigation Department in this regard will be final and binding.

5.    PROCESS OF ALLOTMENT:

5.1    The projects shall be advertised in order to seek bids.

5.2    Applications in response to the advertisement should be accompanied by a non-refundable draft of Rs.1.00 lakh only (Rupees One lakh) payable to Jammu & Kashmir State Power Development Corporation (J&KSPDC).

5.3    All bidders will be subject to pre-qualification as provided in paragraph 3. All pre-qualified bidders will be provided with the pre-feasibility studies prepared by the J&KSPDC.

5.4    Bids shall be invited for premium payable upfront to the Government of Jammu & Kashmir per MW in the case of each project/site, subject to a minimum threshold premium of Rs.2.00 lakhs only (Rupees two lakhs) per MW. Bids received beneath the threshold premium will be rejected.

5.5    Projects will be allotted to the bidder making the highest bid.

5.6    The successful bidder shall be required to deposit the premium/other amount due within a reasonable period of receiving intimation regarding his bid being successful. The exact time period shall be specified in the bid documents for invitation of bids. The successful bidder may be permitted to provide 50% of the bid amount in excess of the threshold as a bank guarantee encashable at the time of actual or scheduled financial closure, whichever is earlier.

5.7    If more than one bidder bids the identical premium per MW for any site/station, a gradation list based on pre-qualification criteria described above shall be the basis for allotment.

5.8    In case any project fails to attract any acceptable bid despite being bid out at least twice, the GOJK may consider allotting the site to a GOJK agency.

6.    SALE OF POWER:

6.1    The IPP/ bidder can contract to sell power to any HT consumer within Jammu & Kashmir, to local grids within Jammu & Kashmir which are not connected to J&K PDD’s main grid, or to any consumer outside the state, or to the Jammu & Kashmir Power Development Department (J&K PDD).

6.2    Sales to the J&K PDD will be mutually negotiated.

6.3    All sales will be approved, as may be required, by the Regulator.

7.    WHEELING CHARGES:

7.1    The infrastructure and facilities of J&K PDD will be made available to all IPPs for wheeling the generated energy.
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7.2    Wheeling charges for wheeling the generated energy to third party consumers or outside the State will be as determined by the J&K PDD/J&K SERC. However, for those projects which are bid out prior to the determination of this rate by the J&K PDD / J&K SERC, the wheeling charge (for the entire concession period) would be 10% of net energy supplied at the interconnection point.

7.3    No wheeling charges are applicable in cases of sales to the J&K PDD, or to local grids within Jammu & Kashmir.

7.4    The J&K PDD will prepare a standard “wheeling and banking agreement draft” consistent with this policy statement. This will be made available prior to any bidding for projects.

8.    GRID INTERFACING/TRANSMISSION LINE:

8.1    The IPP shall be responsible for laying lines for connectivity to the nearest grid sub-station at the appropriate voltage which will normally be 132 KV or 33 KV depending on the capacity of the power station and the distance from the power station to the Grid substation.

8.2    The J&K PDD will determine the specifications of the evacuation facilities required, including the inter-connection point and voltage and the same would be specified in the project information document provided with the application form.

8.3    On specific request from the IPP, the J&K PDD will carry out the implementation of evacuation facilities at charges to be mutually negotiated.

9.    BANKING:

9.1    Developers can avail of the facility of banking of energy within a fixed period span of two months, which would be specified in the standard wheeling and banking agreement. The point of banking-in would be the inter-connection point at which the developer would feed in the energy into J&K PDD system.

9.2    The energy banked into the grid by the IPP shall be monetized at “the average pooled purchase price paid by J&K PDD” during the month of banking-in (into the J&K PDD system). The amounts so credited to the developer for the banked-in energy would be set off against the monetized value of the banked out energy. The monetization of the banked out energy shall be reckoned on the basis of the average pooled purchase price of electricity by the J&K PDD during the months of banking-out (of J&K PDD system). However, in addition, the loss incurred by J&K PDD on account of over-drawal during peak hours compared to input into the system during the peak hours will be compensated by charging the IPP the average differential between the rate for HT consumers in the State for peak and non-peak hours for the net overdrawal against peak power banked.

9.3    The banked out energy shall be deemed to have been delivered at the inter-connection point. The developer would be required to pay the difference between monetized value of the banked-in and the banked-out energy and the peak period differential adjustment within a period of 30 days failing which a penal interest will be levied on the outstanding amount. Similarly, in case of a balance to the credit of the developer it shall be payable by J&K PDD within 30 days with a provision of penal interest on overdue settlement.

10.    DESPATCH:

10.1    Priority will be accorded for despatch into the grid by these IPPs ahead of merit order and any other source of supply, subject to any overall restrictions on the proportion of power that may be bought from such sources, which may be imposed by the Government/ Regulator in the interest of keeping the overall cost of power purchase within reasonable limits.

11.    ROYALTY:

11.1    On all projects governed by this policy, royalty payment for the first 15 years of operation would be exempted in all cases of sale of power outside the State or to the J&K PDD, or to consumers in rural areas not served or inadequately served by the concerned existing distribution license.

11.2    In case of sale to other parties or to J&K PDD after 15 years, a royalty of 12% of net energy wheeled (after deducting wheeling charges) or supplied shall be charged.

12.    INCENTIVES BY STATE GOVERNMENT:

12.1    No entry tax will be levied by the State Government on power generation, transmission equipment and building material for projects.

12.2    Small Hydel Projects shall be treated as an industry and few incentives available to industrial units in backward areas shall also be available to these units including toll tax exemption.

12.3    Income accruing from micro-hydel power project shall be exempted from income-tax as per the Government of India policy in vogue for backward areas.

13.    TRANSFER OF ALLOTMENT:

13.1    Free transfer of shares will be permitted in the companies allotted projects as per the procedure laid down.

14.    TIME LIMIT FOR EXECUTING THE PROJECT:

14.1    IPP shall prepare and submit the detailed project reports and all other information and make the necessary applications for obtaining the statutory clearances and approvals of the State and Central Governments and the Regulator (as applicable) after carrying out the required confirmatory surveys and investigations as per prevailing regulations/ norms within 32 months from the date of allotment.

14.2    The IPP shall be responsible for ensuring completeness of all submissions to concerned authorities. Failure to do so within the stipulated time frame shall be treated as non-compliance with the requirement stipulated in this paragraph.

14.3    The IPP shall achieve the financial closure within 12 months from the date of receipt of all statutory approvals and clearances given by the State and Central Governments. Financial closure would imply firm commitments for financing the entire project, with all pre-disbursement conditions having been fulfilled and the loan documentation being complete.

14.4    The project shall be made operational within 48 months from the date of receipt of all statutory approvals and clearances by the IPP.

14.5    The failure to reach any of the milestones mentioned above will result in automatic cancellation of the allotment of the site, and forfeiture of upfront premium amounts. No compensation would be payable to the IPPs in such instance.

14.6    Failure to reach the milestone as above would result in a liability to pay a penalty by the IPP to the GOJK, computed at the equivalent royalty revenue that would have been payable to the GOJK had the project met the milestone. In case the project enjoys an exemption from royalty in the initial years, the duration of royalty exemption would be reduced by the period of delay.

14.7    The IPP may surrender the allotment back to GOJK if on completion of the DPR, within the stipulated time-frame, it has grounds to establish that the project is not techno-economically viable. On such surrender, the bank guarantee provided by the IPP in lieu of upfront premium would be released and any premium amount paid in excess of the threshold premium of Rs. 2 lacs / MW would be refunded to the IPPs by the GOJK.

15.    ROLE OF J&K PDD AND J&KSPDC:

15.1    The J&KPDD will be responsible for preparing the standard wheeling and banking agreement draft, determination of evacuation requirements and overseeing banking, despatch and royalty arrangements.

15.2    The J&KSPDC will be responsible for preparation of pre-feasibility studies, carrying out the bidding process and monitoring of the development of allotted projects/delivery as per time schedules.

15.3    The J&KSPDC will not participate in the bidding process. However, after the allotment, upon request from the IPP, the J&KSPDC may consider participating as a minority partner (with less than 50% shareholding interest) or perform certain tasks for the bidder on a consultancy basis. Such participation would be independently negotiated between J&KSPDC with the IPP and is not mandatory on the part of J&KSPDC.

16.    REGULATORY OVERSIGHT:

16.1    Aspects of this policy that require regulatory approvals from the concerned Regulator would be subject to such approvals being given and would apply in the manner approved by the Regulator.

17.    DUE DILIGENCE:

17.1    The applicant/IPP shall be responsible for carrying out due diligence with regard to his compliance responsibilities under various applicable Central/ State/other laws, rules and regulations, and ensure compliance with the same.

18.    POWER TO RESOLVE DIFFICULTIES:

18.1    In the event of a dispute, the interpretation of these guidelines made by the Government of Jammu & Kashmir shall be final. In all such matters, to the extent practicable, an opportunity shall be given to the affected stakeholders to be heard before the Government takes any decision.


 




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