MINISTRY OF POWER
SHRAM SHAKTI BHAWAN, RAFI MARG
NEW DELHI-110 001
9th October, 1995
D.O. NO. 6/1/Tariff/Captive Power/95
Subject: Private Power Promotion through Captive Power /Co- generation
Since the announcement of private power policy of the Government
of India in 1991, a number of proposals, including a large number
of proposals from foreign promoters, have been received through
Independent Power Producer (IPP) route. However, as the gestation
period for large power projects is long, we will be able to complete
very few projects in the near future and, therefore, we would face
huge shortage of power. At the end of 1996-97, the energy shortage
is visualized at 15% and peaking shortage at 30%.
2. There is a need, therefore, to open an alternative route other
than Private Generating Company, where the industries themselves
will be interested to meet their own power demand by pooling resources
together. Captive Power Plants offer such an alternative. The captive
power plants of industries may be allowed to sell their surplus
power, if any, to the Grid, on a remunerative tariff, as per mutually
agreed terms. Setting up of captive power plants would quickly add
to the generating capacity in the country. I would also like to
add that Co-generation and small power production is an important
ingredient of private power policy in a number of countries.
3. Few developing countries, in their recent restructuring process
of the electricity sector have brought out important changes, among
others, open access to the transmission system of the State grid
on payment of mutually agreed wheeling charges for facilitating
new entrants in the power sector on the captive power/co-generation
route. The States can assure such an entry to the new proposed captive/co-generation
4. You may, therefore, create an institutional mechanism which
may allow captive power units an easy and automatic entry into the
Power Sector by quickly clearing captive power applications by State
Governments, and giving them rational tariff for purchase of surplus
power by the grid and third party access for direct sale of power
to the other industrial units.
With best wishes,
All Chief Secretaries
COGENERATION POWER PLANTS
TO BE PUBLISHED IN THE GAZETTE OF INDIA
PART I-Section 1
PUBLISHED BY AUTHORITY
Ministry of Power
New Delhi, Dated: 6th November , 1996
Subject : Promotion of Co-generation Power plants
1.1 Since the announcement of private power policy of the Government
of India in 1991, a number of proposals, including proposals from
foreign promoters, have been received through Independent Power
Producer (IPP) route. However, as the gestation period for large
power projects is long, it would be possible to complete very few
projects in the near future and, therefore, we would face huge shortage
of power. At the end of 1996-97, the energy shortage is visualized
at 15% and peaking shortage at 30%.
1.2 It is, therefore recognized that there is an urgent need to
open an alternative route, other than Private Generating Company,
where the industries themselves will be interested to meet their
own power demand by pooling resources together. Captive Power Plants,
because of the inherent benefits offered by them, were considered
as one such alternative route. Accordingly, State Governments were
requested to accord high priority to setting up of captive plants
in their States and also encourage absorption of the available surplus
power, to be remunerative tariff. A detailed guide line to this
effect was issued through a letter to All Chief Secretaries of States
from the office of the Secretary (Power), Government of India (D.O.
NO. 6/1/Tariff/Captive Power/95, 9th October, 1995).
Through a subsequent communication (DO No.A-31/94-IPC dated January
30, 1996) regarding clearance process for captive power projects,
it was clarified that the captive power plants of any other persons
[including juristic persons and excepting generating companies]
are not subject to the provisions of Section 29(2) of the Electricity
(Supply) Act. Section 43(1) of the Act provides that the Board may
enter into arrangement with any person producing electricity within
the State for the purchase of the power on such terms as may be
agreed, of any surplus electricity which that person may be able
to dispose of. However, as per Section 44(2A) the Board shall consult
the authority in cases where the capacity of new generating station,
or as the case may be additional capacity proposed to be created
by the extension or replacement exceeds 25 MW. Hence, in terms of
Section 44 of the Act, captive power/cogeneration plants require
the approval of the State Electricity Board only.
The Board has to simply refer the proposal to the Central Electricity
Authority for consultation, under Section 44(2A) of the Act, in
cases where the capacity of the new generating station exceeds 25
MW. Ministry of Power, Government of India, identifying the need
for some rationale for fixing of the tariff for the captive power
plants had suggested setting up of an institutional mechanism allowing
captive power units an easy and automatic entry into the state grid
and announcement of a mutually-agreed, rational rate of purchase
of incremental power generated by the captive plants (not lesser
than the variable cost of power and not greater than that allowed
under the two-part tariff notification).
1.3 It is generally recognized that industry in general and a process
industry in particular needs energy in more than one form and if
the energy requirements and supply to the industrial units are carefully
planned the overall efficiency of a very high order is possible
to achieve. With the combined objectives of promoting better utilisation
of precious energy resources in the industrial activities and creation
of additional power generation capacity in the system, encouragement
to co-generation plants in the
country is being suggested.
2. Definition of Cogeneration
2.1 A cogeneration facility is defined as one which simultaneously
produces two or more forms of useful energy such as electric power
and steam, electric power and shaft (mechanical) power etc. Cogeneration
facilities, due to their ability to utilize the available energy
in more than one form, use significantly less fuel input to produce
electricity, steam, shaft power or other forms of energy than would
be needed to produce them separately. Thus by achieving higher efficiency,
cogeneration facilities can make a significant contribution to energy
3. Objectives of the Policy
3.1 As electricity and heat are fundamental inputs to most
of the industrial activities the present policy strives to achieve
the dual objectives of achieving higher efficiency in fuel use in
the industry as well as the availability of surplus electricity
to the State grid, by combining power and heat generation for industrial
4. Process for creation of Cogeneration Facility
4.1 With a view to promote setting up of cogeneration plants, it
is proposed that the industry having cogeneration potential would
be allowed to develop a power generating facility without necessarily
going through the competitive bidding process, for projects of any
size. In addition, in such cases the projects for the purpose of
CEA clearance would be treated in the same way as any proposal for
setting up of captive plant is required to be treated by the State
Government under section 44 of the Electricity (Supply) Act, 1948.
5. Cogeneration Plants
5.1 Two basic cogeneration cycles have been identified:
- Topping Cycle: Any facility that uses fuel input for power
generation and also utilizes for useful heat for other industrial
activities. In any facility with a supplementary firing facility,
it would be required that the useful heat, to be utilized in the
industrial activities, is more than the heat to be supplied to
the system through the supplementary firing by at least 20%.
- Bottoming Cycle: Any facility that uses waste industrial heat
for power generation by supplementing heat from any fossil fuel.
6. Qualifying Requirements
6.1 A facility may qualify to be termed as cogeneration facility
if it satisfies certain operating and efficiency standards which
are explained below.
(I) Qualifying Requirements for Topping Cycle:
The qualifying requirements for topping cycle would depend on the
type of fuel used as the overall efficiency levels likely to be
achieved for power generation varies with the choice of fuel. Essentially,
any cogeneration facility meeting the efficiency requirement will
be more efficient than any combination of separately generated electricity
and steam using the state-of art- technology. As such while setting
the efficiency standards, the achievable efficiency in case of a
particular fuel has been kept in consideration. In addition, for
all cases of cogeneration facility, it would be required that at
least 20% of the total energy output is
in the form of useful thermal energy.
As the cogeneration project would be feeding power to the state
grid, in order to maintain grid stability and facilitate proper
planning of the power system, it would be required that the cogeneration
facility must be available to supply at least 5MW of power for at
least 250 days in a year.
(a) Using coal as fuel
Assuming that the achievable thermal efficiency for power generation
using coal as fuel hovers around 35% while the boiler efficiency
for steam generation observed in Indian industries is about 90%,
the efficiency standard set for any cogeneration facility is as
The sum of useful power output and one half the useful thermal
output be greater than 45% of the facility s energy consumption.
(b) Using Liquid Fuel
Assuming that the achievable thermal efficiency for power generation
using liquid fuel based combined cycle power generation system is
about 50% while the boiler efficiency for steam generation observed
in Indian industries is about 85-90%, the efficiency standard set
for any cogeneration facility is as under:
The sum of useful power output and the useful thermal output be
greater than 65% of the facility s energy consumption.
(c) Refinery Bottoms as fuels
Refinery Bottoms or those by products of refining process would
be permitted to be used as fuel for cogeneration facilities to be
set up by any petroleum refining unit which can not be easily marketed
due to transportation problems or due to low heat content. However,
to qualify as a cogeneration plant, the sum of useful power output
and one half the useful thermal output be greater than 45% of the
facility s energy consumption. And in any calendar year, not less
than 90% of the total heat input for the facility should come from
refinery residue or the refinery bottom.
(ii) Qualifying Requirements for Bottoming Cycle
In case of bottoming cycle, the total useful power out put in any
calendar year must not be less than 50% of the total heat input
through supplementary firing.
7. Tariff fixation
7.1 While fixing tariff from a cogeneration plant, the basic consideration
would be to share the benefits of higher efficiency. In addition,
the other advantage available to the industry is availability of
assured supply of power and possibly at a tariff lower than what
the SEBs normally charge from their industrial consumers due to
cross subsidization. On the other hand SEBs also stand to benefit
from the fact that they qet surplus power at a rate lower than the
marginal cost. However, in the bargain SEBs would have to let go
some of their good customers. The tariff should, therefore, reflect
7.2 The tariff can be fixed by the SEB by making adjustments for
the higher efficiency and applying the same on the marginal cost
of generation. Accordingly, the SEB can notify an acceptable tariff,
reflecting the modified marginal cost of generation and pay at that
rate for the life of the plant barring major fuel price escalations.
7.3 Alternatively, the SEBs may chose to notify the first year
tariff in two parts, fixed and variable, and announce an tariff
escalation formula considering the fact that with the servicing
of debt, recovered through depreciation, the fixed cost component
comes down every year and at the same time the fuel cost increases
due to fuel escalation.
7.4 However, realizing the fact that ultimately the power sector would be required to move away from the cost based
to get the full benefits we can probably use cogeneration plants
for this switch over as even if there is slight error in fixing of
the marginal tariff the damage would be very limited and can be corrected
quickly in the subsequent cogeneration plants. This would also provide
useful bench marks for other major IPPs.
7.5 In case of topping cycle plants using refinery bottom as fuel,
the tariff would be fixed by the SEB on negotiated basis, providing
for recovery of fixed costs of the power generating facility and
the variable cost which could be determined by making adjustments
for efficiency factors and other operational factors. Typically,
the tariff for such plants may be represented by
Tariff = FCC + 0.8*Variable cost
8. Procedure for Obtaining Qualifying Status
8.1 The Qualifying Status to any facility would be granted by the
State Government. The power producer would be required to submit the necessary documents to the State Government/SEB
to establish fulfillment of the qualifying requirements in terms of efficiency
criterion, choice of fuel, power generation technology and the stages
of heat absorption in the industry.
9. Generation Schedule
9.1 As the availability of surplus power to be fed into the State
grid will vary during the day depending on the operating cycle of
the industry and may also vary with season if the industrial operations
are season specific such as sugar mills etc. the power producer and
the SEB/State Government would be required to mutually work out the
schedule for power supply to the grid considering the industry and
grid requirements. sd/-
Secretary to the Government of India
The captive power policy is refined from time to time to encourage
such plants to meet immediate shortages. The circular of January
9, 1997 is one more initiative to encourage captive generation
January 9, 1997
D.O No. A-31/94-IPC
Government has made competitive bidding mandatory for solicitation
of proposals for Independent Power Projects (IPPs) and clarified vide
D.O of even number dated 18.1.1995 from Secretary (Power) that all
future projects should come through the process of competitive bidding.
The Central Electricity Authority was asked not to entertain in future
proposals which have not been processed through the competitive bidding
2. Government of India have also, vide its letter of even number
dated 9th October, 1995, emphasized the need to open an alternative
route other than the private generating companies where the industry
themselves would be interested to meet their own demand by setting
up captive power plants. Subsequently, vide letter of even number
dated 30th January, 1996, it was clarified that proposals regarding
captive power plants to be setup under the provisions of Section
44 of Electricity (Supply) Act,1948 would not come under the purview
of Section 29-31 of the Act which relate to CEA s detailed scrutiny
of proposals and techno-economic clearance. The intention was that,
in view of the large demand supply gap, existing industries would be encouraged
to set up their own captive power plants to add quick capacity
in the electricity supply industry.
3. Though we had received a positive response from the States and
the industrial houses, it has been suggested by some States to the
Government of India that some of the industries, though keen to set
up power plants captive to the use of the industry, find it difficult
to set up the power plants through the existing companies as they
do not have the requisite expertise in the field of development of
power plants and their operations as well as the inability of some
of these companies to bear the heavy investment cost. Setting up
of the power plants by an independent entity, either within the premises
of the existing industry/factory or without, has, therefore, been
favoured, with the total power generated dedicated to the existing
industry/groupof industries but without envisaging any sale of power
to the State grid. However, these would be generating companies by
definition (hence an IPP) and the government of India instructions
dated18.1.1995 referred to above require that selection of the IPP
be through competitive bidding by the State Government or the State
Electricity Board (SEB). This is not being preferred by the industry
as the power
plant to be set up exclusively for the supply of power to the industry,
mostly within the existing premises, at mutually agreed tariff, and,
therefore, they would prefer to have the choice to negotiate with
parties on a bilateral basis instead on the IPP being selected through
Competitive Bidding by the States or the SEBs.
4. Government have considered the above suggestion and decided that,
in order to facilitate setting up of generating stations by IPP exclusively
for the captive use of an industry or a group of industries, without
involving any sale to State grid, the selection of such IPPs through
competitive bidding by the States or the SEBs would not be required
and the provision contained in letter dated18.01.1995 is relaxed
to this extent.
With best wishes,
Dr. E.A.S. Sarma
D.O. No. 4/1/97-IPC-II
New Delhi dated January 19, 1998
Please refer to D.O. letter No. A-31/94-IPC dated January 9, 1997
from Ministry of Power, advocating setting up of generation facilities
by Independent Power Producers (IPPs) exclusively for the captive
use of an industry or a group of industries, without involving any
sale to the State Grid. Such measures can readily result in additions
to the existing generating capacities. In fact, a few States have
tried this approach and have been able to set up power projects,
jointly owned and operated by industrial consumers in their respective
2. You are aware of the urgent need to add new generation capacity
to meet the rapidly increasing demand for electricity. As of now,
there are 31 power projects in the private sector which have been
accorded techno-economic clearance by the Central Electricity Authority
and are awaiting financial closure. The main constraint in most
of these cases is the reluctance on the part of lenders to extend
loan assistance to the IPPs beyond what the escrow limit of a State
permits. As a result of the subsidized tariff structure of the SEBs,
you are aware that the escrow ability of most states is low, making
it difficult for the IFIs to sanction loans to finance the project.
3. To some extent, the problem could be mitigated, if groups of
existing and new industrial consumers could come together and jointly
set up and operate captive power projects for meeting their captive
requirements, with the supply to the grid being restricted to the
minimum. For this purpose, as has been done in AP and Gujarat, these
consumers could be located at different places, but at the same
time, could constitute a joint venture and wheel power from the
generating station to the consumer end, subject to satisfactory
commercial arrangements being firmed up with the concerned SEB.
4. Kerala and Maharashtra have recently announced schemes involving
captive power projects (Annexure 1.1 & 1.2). Such an arrangement
could provide additional generation capacity without the State Governments
having to provide guarantees/Escrows. An assessment has recently
been made of the total energy generated by captive power plants
in 1994-95 in various States in the country as well as the installed
generating capacity in certain selected States. The details are
at Annexure II.1 & II.2. From this, it is evident that the total
captive capacity in the country is more than 11,000 MW and most
of the captive power plants in the country have low levels of capacity
utilisation. From the information contained in Annexure-II, it appears
that the captive generation capacity in your State is around _______
MW. (As per Annexure-II). I would suggest for your consideration
that the State Government may adopt a captive generation policy
that will facilitate the maximum use of the available capacity to
meet the increasing demand for electricity in the State. While there
are different approaches to this, as is reflected in the policy
initiatives taken by Maharashtra and Kerala, I would request you
to consider adopting, among other things, differential peak/off-peak
tariffs with time-of-the-day metering to facilitate utilisation
of this capacity to the maximum extent during the peak hours in
your State. With many States having to go in for power projects
based on expensive liquid fuels, captive capacity on which investment
has already been sunk could perhaps offer a cheaper mode of electricity
supplies to bridge the gap between supply and demand.
5. I request you to evolve a captive generation policy and let us
know the tangible steps taken by your Government in this regard.
All Chief Secretaries/Secretary (Energy)/Chairmen, SEBs
Chairman, Central Electricity Authority.
Policy Guidelines of Government of Kerala
for Installation of Captive Power Generation
1. Applicants eligible for captive power generation
1.1 Software/ Hardware technology parks declared by Government.
1.2 Techno parks declared by Government.
1.3 Industrial parks declared by Government.
1.4 Kinfra parks established/declared by Government.
1.5 Industrial estates declared by Government.
1.6 Industrial growth centres declared by Government/ Kerala State
Industrial Development Corporation.
1.7 Export Processing Zone declared by Government.
1.8 Existing licensees.
1.9 Existing Industries.
1.10 New Industries.
2. Capacity of Captive Power Plant (CPP):
Minimum: 3 MW Maximum: 25 MW
3. Generation voltage and frequency:
The CPP shall be three phases,50 Hz, 11 Kv.
4. General conditions
The applicants in items 1.1 to 1.7 are allowed to install CPP
for the use of the consumers within the Parks/Estates/Centres. Those
applicants can sell the power generated from the CPP to the consumers
within the Parks/Estates/Centres. For this purpose, the applicants
will be declared as sanctioned holders. They shall apply to Government
for declaring them as sanction holders as per Section 28 of the
Indian Electricity Act, 1910 and obtain sanction.
5 Statutory sanction/clearance.
It is the responsibility of the applicants who desires to install
CPP to obtain all statutory clearances/ sanction from the respective
6. Consumption and sale of energy
6.1 The Kerala State Electricity Board will not purchase energy
from the CPP having the capacity of less than 3 MW.
6.2 The owners of the CPP can consume the energy generated from
the CPP for their own use. They shall not sell energy generated
from the CPP to anybody else other than the KSB Board. The KSB Board
will purchase the energy generated from the CPPs fully or the excess
quantity. The purchase price will be at the rate determined on mutually
6.3 as far as licensees are concerned, they can sell energy generated
from the CPP to the consumers within the licensee=s area and also
to the KSB Board. But the licensees shall not sell the energy generated
from the CPP to anybody else other than the consumers within the
licensee area or KSB Board. The selling price of energy to the Consumers
within the area of the licensee shall be determined by the licensee.
But the selling price of energy to the KSE Board will be determined
on mutually agreed terms.
6.4 the licensees/sanction holders having CPP can purchase energy
from KSE Board. But the licensee/sanction holder will not get the
privilege of grid tariff for this purchase. The price will be at
the rate determined by the Board.
6.5 the KSE Board will sell the energy purchased from the CPPs
back to CPPs at a pooled price determined by the KSE Board and taking
into consideration the price at which energy was purchased from
6.6 KSE Board will not purchase energy from the CPPs between 2200
hours and 0500 hours.
7. Sanction for installation of CPP.
7.1 The Deputy Chief Engineers, Transmission Circles in the respective
shall be authorized to accord sanction for installation of CPPs
having capacity less than 3 MW for which applicants have to send
the applications to the respective Deputy Chief Engineers, Transmission
Circles. The Depty Chief Engineers will give a decision within one
month, failing which it will be presumed that he has no objection
and the applicants can go ahead with installation of generators.
7.2 Sanction for installation of CPPs having capacity 3 MW and
above shall be accorded by the KSE Board. The applications in such
cases shall be sent to the Chief Engineer (Thermal & Commercial)
Vaidyuthi Bhavan, Pattom. The K.S.E.B. shall communicate a decision
within 45 days, failing which it will be presumed that KSEB has
no objection for installation of generators.
8. Banking of energy
The excess energy generated from CPP wheeled to the KSEB grid can
be banked for a period not exceeding one month from the date of
wheeling. The Board will charge 2 paise per unit for the energy
banked per month or part thereof. Banking is not permissible between
2200 hrs. and 0500 hrs.
9. Settlement of Bills
The energy transaction will be billed and settled on monthly basis
by the Special Officer (Revenue), KSEB
10. Grid Discipline
The owners of CPP have to abide by grid discipline and will not
be entitled for any compensation in the event of grid failure due
to force-majeure conditions, fluctuation in voltage, frequency or
other reasons. The same condition will apply for synchronization of CPP with KSEB grid
11.1 The owners of CPP have to install Time of-Day meter having
import-export registering facility and allied equipments at their
cost in the nearest 66 KV, 110 KV or 220 KV sub station of the KSE
Board, where the power from the CPP is wheeled to the KSEB grid.
The meter and allied equipments will be the property of the owners
of the CPP. It is their responsibility for their upkeep and replacement.
If the meter and or the allied equipments become defective or cease
to register the quantity of electricity the, owners of CPP shall
replace it by a good meter /equipment within one month of they becoming
defective /ceases to register. If the owners of CPP fails to replace
the defective meter/equipment within the said period of one month,
the KSE Board will discontinue the purchase or sale of energy from
the CPP until the meter / equipments is replaced by good meter/equipments.
11.2 The KSE Board will provide a check meter near to the very
same location where the owner of the CPP has installed his own meter.
12. Method of billing
The method of billing of the energy transaction will be as per
the guidelines issued by the SREB for the interstate exchange of
energy. The same procedure will apply during the period when the
meter or the allied equipments of either parties are defective or
cease to register the quantity.
13. Calibration of the meters
The meters installed by both the parties will be jointly calibrated
before installation. The recalibration will be done jointly once
in every six months from the date of installation. If recalibration
is found necessary for a lesser period due to any reason, it shall
be done jointly.
14. Interfacing with KSEB grid
14.1 The CPPs having capacity of 3 MW and above alone will be permitted
to be synchronized in the KSE Board Grid Substation. The synchronization
shall be done at the agreed voltage as per the scheme approved by
Chief Engineer. The owner of the CPP shall send detailed scheme
to the Chief Engineer (thermal & Commercial), Vaidyuthi Bhavan,
14.2 The equipments for synchronization, control, protection step
up /step down transformer and inter locking shall be purchased and
installed by owner of the CPP at his cost.
14.3 The owner of the CPP has to construct the transmission line
at his cost for wheeling the power generated from the CPP to the
nearest 66 KV, 110 KV or 220 KV grid substation of the KSE Board.
15. Independent use of power from CPP
If any industry or licensee wants to install captive power plant
for its own use independently, there shall not be any possible inter
connection between its load fed by its generation and KSEB supply.
The industry or licensee shall purchase and install change over
switch or circuit breaker with inter lock at its cost, as per the
scheme approved by the Chief Engineer (Generation) for which detailed
scheme shall be sent to the Chief Engineer (Generation).
16. Reduction of contract demand
No reduction in contract demand and or rebate in MP charge shall
be allowed in proportion to the energy wheeled or sold to KSE Board.
17. Power supply during shut down/maintenance of CPP.
The KSEB will supply the power required for the construction of
CPP at the rate applicable to other consumers to whom KSEb sells
power. The owner of the CPP has to remit the cost of construction
of the power line / installation of all equipments in advance. The
power supply will be provided on out of turn priority.
18. Construction Power
The KSEB will supply the power required for the construction of
CPP at the rate applicable to other consumers to whom KSEB sells
power. The owner of the CPP has to remit the cost of construction
of the power line /installation of all equipment in advance. The
power supply will be provided on out of turn priority.
The owner of the CPP can use any fuel permitted by the Government
of India or any other statutory authority. Non conventional sources
can also be used as per the terms laid down by the competent authority.
The tariff for the power generated will be worked out on mutually
agreed terms subject to the notification dated 30.03.92 of Government
of India and its subsequent amendments, if any. It is the responsibility
of the owner of the CPP to obtain fuel allocation and all other
20. Commitment charges
If the owner of the CPP wants to keep the KSEB supply as stand-by,
he has to pay to KSEB, stand by commitment charge which will be
equal to double the demand charge applicable as per the tariff notification
issued by KSEB from time to time for the voltage class applicable
to other consumers. This is in addition to energy charge.
21. Electricity Duty
The owners of the CPP are exempted from payment of Electricity
duty for the energy generated and consumed by their units for a
period of next five years. But they should pay electricity duty
for the energy sold outside their jurisdiction allowed by these
22. Subsidy / Finance
The KSE Board will not pay any subsidy or render any financial
assistance to the owners of the CPP for the installation of the
23. Tariff Concession / Subsidy / Incentives
In respect of industries eligible for concessional tariff / incentives
subsidies the KSE Board will to take into account concession / incentives
/ subsidies for determining the tariff for the power purchase by the
KSE Board from CPP or sold to them.
The land whether private or Government required for installation
of CPP has to be purchased by the owner of the CPP.
25. Exemption from power cut
The owner of the CPP can consume the power generated from the captive
power plant without any restrictions during the period of power
cut for their own use or use of their consumers.
26. Wheeling charges and loss on Transmission
Wheeling charge at two percent (2%) of energy wheeled an Transmission
loss at ten per cent (10%) of the energy wheeled will be debited
to the account of the owner of the CPP.
27. Penalty for low power factor
27.1 The owner of the CPP has to install suitable meter to record
the power factor of the CPP at his cost. If no such meter is installed,
the power factor shall be determined by taking the ratio of the
reading of the Kwh and KVAh taken monthly.
27.2 The power factor of the CPP shall be maintained not less than
0.95 lag by the / owner of the CPP at his cost, if it drops below
0.85 lag, the selling price of energy by the owner of the CPP to
his consumers or to the KSE Board shall be reduced as indicated
Below 0.85 lag up to 0.75 lag
2% of the energy charge for every reduction of 0.01 power factor
from 0.85 lag.
Below 0.75 lag
3% of the energy charge for every reduction of 0.01 power factor
from 0.85 lag.
Should the power factor drop below 0.75 and so remain for a period
of two consecutive months it must be brought to not less than 0.85
within a further period of six months by the owner of the CPP failing
which without prejudice to the right of the Board to reduce the
selling price of energy from the CPP and without prejudice to such
other rights as having accrued or any other rights of the Board,
the wheeling of the power generated from the CPP to the KSEB grid,
synchronization with the KSEB grid and purchase of power by KSEB
will be discontinued.
28. Submission of applicable
The parties interested in installation of CPP have to submit the
applications to the Chief Engineer (Thermal & Commercial) KE
Board, Vaidyuthi Bhavan, Pattom, Trivandrum 695004.
29. Time of completion of the project
The owner of the CPP to whom approval has been granted by the Board
shall commission the CPP, synchronize with KSEB grid and put into
commercial operation within one year of the date of approval of
the scheme by the Board failing which the KSE Board will not purchase
the power from the CPP.
The owner of the CPP to whom sanction has been accorded has to
execute an agreement with Chief Engineer (Thermal & Commercial)
ENERGY GENERATION BY CAPTIVE POWER PLANTS
(FINANCIAL YEAR 1994-95)
|Energy Generated (GWH)
|All India% share (All India)
|PLF (All India)
|INSTALLATION GENERATION CAPACITY
IN CPPS IN MAJOR STATES/REGIONS
(2263) (FIGURES IN MW)
Government of Maharashtra
Industries, Energy and Labour Department
Government Resolution No. MISC 1195/CR-8/NRG-7
Mantralaya, Mumbai-400 032
Dated December 20, 1997
POLICY FOR CAPTIVE POWER GENERATION
To promote captive generation, the Government had enunciated its
policy vide Government Resolution No.MSC-1095/CR-2776/NRG-2 dated
20.12.1995. In the light of this policy, Maharashtra State Electricity
Board (MSEB) is required to give prior concurrence under section
44 of the Electricity )Supply) Act, 1948. Certain implementation problems were brought to the notice of the Government by some promoters.
In order to add to the total installed capacity of the State through
captive generation and to further the process of industrial development,
the question of giving further relaxation to the existing policy
was under consideration of Government.
Government has now decided to modify its existing policy, dated
20.12.1995 and enunciates the following policy.
All persons/institutions who intend to install captive generation
units in the State of Maharashtra are required to take a prior clearance
under Section 44 of the Electricity (Supply) Act, 1948 from MSEB
;which would be given as per the following policy:-
(1) Industrial unit which intends to install captive generation
sets for self consumption of electricity shall be permitted to do
so under the condition that such self consumption should be at least
75 per cent of the total installed capacity. This self consumption
may include consumption by ancillaries integrated with the main
process and located on the same industrial plot.
(2) Balance 25 percent of the installed capacity may be sold to
any 2 (two) third parties anywhere in the State through wheeling
to be permitted by MSEB/licensees after recovery of appropriate
wheeling charges and transmission losses.
(3) MSEB and the licensees are empowered to finalize the technical
and commercial arrangements between captive power producers and
the third party purchasers.
(4) Clearance may also be granted for setting up of a captive power
plant by a company (captive generating company) different from the
consumer company (captive user company) on the condition that the
user company owns at least 51 per cent share of the generating company.
(5) Such captive generating company as referred to in the Sr. No.(4)
above will be permitted for sale of surplus electricity to third
parties as per Sr. No.(1) and (2) above.
(6) Such captive generating company as mentioned in Sr. No.(4)
above or any other company intending to sell surplus electricity
would require a prior permission from the Energy Department of the
State Government under Section 28 of the Electricity (Supply) Act,
(7) This policy is also made applicable to all the licensees in
addition to the MSEB.
(8) MSEB may purchase this surplus power generating from such captive
units at a rate which is 10 per cent lower than their last year=s
average rate of realization except during the night time period
of 10 p.m. to 6 a.m. .
(9) If the captive generating company requires a standby from the
MSEB/licensees, then in case of planned shut down, the rate of standby
leviable by MSEB/licensees shall be double the existing rate. In
case of an unplanned shut down, the charges leviable by MSEB/licensees
would be 3 times the charges leviable by MSEB/licensees would be
3 times the existing tariff. The event of planned shut down must
be notified at least 3 months in advance in writing to the MSEB/licensees.
A unit can be shut down for annual overhaul only once in a year
for a continuous period of maximum one month.
(10) This policy is made applicable to the existing captive units
( L.V. Nilesh )
Deputy Secretary (Energy)
CAPTIVE POWER POLICY (Circulated in July 2001)
1.0 OBJECTIVE :
According to the 16th Electric Power Survey conducted by CEA,
the country has energy shortage of 7.8% and peaking shortage of
13.0% for the current year. The capacity addition required by the
end of 11th Plan to meet these shortages is nearly 100,000 MW. In
view of the massive investments required for capacity addition it
is necessary that the existing investments in the power sector are
fully utilized and captive power plants which are utilized only
partially are encouraged to sell power to the grid. The following
general guidelines are recommended to the States to enable a more
liberal framework for setting up Captive Power Plants and utilizing
their surplus output for benefit of the consumer.
2.0 PERMISSION AND APPROVAL:
i) Permission for installation of Captive Power Plant is to be
obtained from SEB under Section 44 of Electricity (Supply) Act,
1948. For captive power generation exceeding 25 MW, SEB will accord
permission under Section 44 of Electricity (Supply) Act, 1948 only
after consulting the Central Electricity Authority as per Section
44 (2A) of Electricity (Supply) Act, 1948.
ii) The following would be eligible to install a Captive Power Plant:-
a. A consumer of electricity
b. A group comprising more than one consumer as a joint venture.
c. An actual user of power but not a consumer.
d. A group of actual users of power, but not consumers, as a joint
e. A group comprising both consumers and actual users of power
as a joint venture. but excluding A Generating Company@ as defined
under Section 2(4-A) of Electricity (Supply) Act 1948.
a) If the captive plant falls under the category of hydro or co-generation
plant, such plant, irrespective of its size and status of power
supply position in the State, may be permitted liberally.
b) If the Captive Power Plant is based on coal or liquid fuel
or gas and if the State is deficit in power supply, the installation
of such captive power plant could normally be allowed and the capacity
of the plant permitted up to 200% of the requirement of the industry
for its own use.
c) If the Captive Power Plant is based on coal, liquid fuel or
gas and the State is surplus in power, the installation of such
captive plants can still be considered in the following cases:-
(i) If the industry requires uninterrupted power supply due to
the nature of the industry and if the State/SEB or Successor entity
are not able to guarantee supply of such requirements, the proposal
for setting up of such a captive power plant for the uninterrupted
power supply requirement of the industry can be considered.
(ii) If the industry requires quality power supply (within the
stipulated variations in voltage and frequency) and if the State/SEB
or Successor entity are not in a position to guarantee the power
supply of such stringent requirements, the proposal for installation
of the captive power plant of the required capacity can be considered.
(iii) If the cost of generation from the captive plant is found
to be lower compared to the tariff of the power supply from the
grid, the proposal may be considered after thoroughly examining
the cost and tariff aspects.
d) Banking facilities may also be provided to the Captive Power
Plants so that available capacities are utilised to the extent possible
and when required. The rates for banking may be determined on mutually
e) Units in Special Economic Zones (SEZ) and industrial estates
may be allowed to set up CPPs liberally.
4.0 If the CPP is of co-generation in nature, and the capacity
exceeds 25 MW, the proposals shall be forwarded to CEA for consultation
under Section 44(2A) of Electricity (Supply) Act, 1948 duly certified
by the concerned Utilities that the proposal qualifies for the status
of co-generation. (In this regard, MOP Resolution No.A-40/95-IPC.I,
dated 6th November, 1996 may be seen for reference).
5.0 Permission of State Electricity Board is required to synchronize
and operate with the Grid.
6.0 All statutory clearances for setting up the CPP have to be
obtained by the owner of the CPP of his own accord.
7.0 CONDITIONS FOR USAGE OF CAPTIVE POWER
Energy generated from captive power generating units:
i) Can be used by the owner of the captive power generation plant.
ii) Can be used by sister concern (s) of the owner of the captive
power generation plant.
iii) Balance power after usage in items (i) and (ii) above can
be sold to SEB, if required by them.
iv) Third Party sale is also permissible, with the approval of
v) Captive generator could be asked not to draw power from the
grid during peak seasons/hours.
8.0 WHEELING CHARGES & RULES
Prior approval of SEB has to be obtained for wheeling of power.
Captive generated power may be wheeled only where interface for
synchronization with the grid exists. Wheeling will be done to any
service (High Tension or Low Tension). The cost of interfacing lines,
switchgear metering and protection arrangement may be met by the
CPP and/or the Board as per mutual arrangement. Similarly, the wheeling
charges may be worked out based on pooled rates of wheeling charges
worked out by the Central State Transmission Utility of that Region
and the amount of energy wheeled.
9.0 PRICING OF THE BALANCE POWER SOLD TO S E B
i) For the FIRM POWER, the pricing for the Captive Power Generation
could be in single part i.e. rate for units alone. The tariff for
sale of power from thermal CPPs to SEB may be fixed after mutual
discussions between SEB & CPP and could be based on pooled variable
charge of thermal power stations operating in the SEB plus some
percentage of the pooled variable charges as an incentive to CPP
generator. In case of hydro CPPs also, the tariff for sale of power
to SEB may be fixed after mutual discussions between SEB & CPP
and could be based on pooled variable charge of thermal power and
incentives. To attract more power from CPPs into the Grid, tariff
could also be based on the highest variable cost in the system or
the actual variable cost of CPP, whichever is lower, and some percentage
of the variable cost as an incentive.
ii) The rate for INFIRM Power could be at 75% of the normal rate.
iii) Tariffs for purchase of power from captive plants may be determined
by SERCs wherever they have been established.
10.0 BILLING METHODS
i) Separate billing may be carried out for export and import of
power by the Captive Power Generator. Import of power may be billed
according to the Tariff Notifications of Government from time to
ii) Export billing may be done for the units exported as per the
mutual agreement between SEBs & CPP.
Definitions are given in Annexure.
i). CONSUMER means any person who is supplied with
electric energy by a State Electricity Board.
ii) ACTUAL USER OF POWER means one who is not a
consumer but uses power out of captive power generation.
iii) GRID means electrical network of a State Electricity
iv) BOARD means State Electricity Board or its successor
v) CPP means Captive Power Plant.
vi) FIRM power means quantity of power in units
committed by the owner of the Captive Power Plant to be sold to
State Electricity Board annually.
vii) INFIRM power means quantity of power in units
sold to SEB without any commitment.
viii) CAPTIVE POWER PLANTS may be defined as plants
meant for catering to the needs of a particular industry/consumer
or group of industries/consumers for their own use, which should
be not less than 50% of the total output of the plant.
ix) GENERATING COMPANY means a company registered
under the Companies Act, 1956 and which has among its objects
the establishment, operation and maintenance of generating stations