THIS MEMORANDUM OF UNDERSTANDING is made between Ministry of Power, Government of India and Government of Gujarat to affirm the joint commitment of the two parties to reform Power Sector in Gujarat State and to set out the reform measures of Gujarat under the Accelerated Power Development Program (APDP) of Government of India.

I. PREAMBLE:

Government of Gujarat is committed to reforming its Power Sector with a view to providing for reorganisation and rationalisation of electricity industry in the State of Gujarat and for establishing a State electricity regulatory commission for regulating the industry to ensure development of an efficient, commercially viable and competitive power supply industry which provides reliable and quality power at competitive prices to all consumers in the State.

The Government of India is committed to support the process of reform of the Power Sector in the State of Gujarat. The Government of India believes that reforms in the Power Sector are now imperative. Unless reforms are implemented quickly, it may be difficult to even maintain the present quality of power supply leave alone improve it.

This Memorandum of Understanding between the Ministry of Power, GoI and the Government of Gujarat (GoG) will undertake in a time bound manner, the process of reform and restructuring and the support which Gol would give to the GoG.

In order to meet the various requirements under this scheme, Government of Gujarat (GoG) is undertaking reform program with vigour. The Government of Gujarat has already achieved following notable milestones in this direction.

1. Setting up of Gujarat Electricity Regulatory Commission (GERC).

2. Approval of Reform Bill by State Cabinet and submission by GoG to Gol.

3. Implementation of First Tariff Award of GERC.

4. Incorporation and Establishment of separate transmission company (GETCO).

5. In the process of restructuring Gujarat Electricity Board (GEB) , to begin with a separate generating company in the name and style of 'Gujarat State Electricity Corporation Limited (GSECL)" has been formed under the Companies Act. GSECL has already set up two(2) coal based Plants (total capacity of 420 MW) at Gandhinagar & Wanakbori. GSECL is setting up another 110 MW plant at Dhuvaran.

GoG has initiated necessary action to achieve the following further milestones in a time bound manner.

1 ) Transfer of assets and management of Gandhinagar and Utran Power Stations from GEB to GSECL.

2 ) Offset of subsidy and subvention arrears owed by GOG to GEB till 31.03.2000 against dues of the GEB owing to GoG and payment of outstanding municipality dues owing to GEB till 31.03.2001.

3 ) Introduction of the Reform Bill in the Gujarat State Assembly and subsequent enactment of the Reforms Act .

4 ) Rationalisation and reduction of electricity duty in GoG's budget for FY 2002.

5) Meters at all 11 KV feeders are already installed.

6) Implementation of Action Plan to meter all consumers in the state, in a phased manner over a period of three years from 10. 10.2000 as per the GERC's order.

7) Creation of independent distribution circles at Kheda and Rajkot as Profit Centres and according of fiscal and administrative autonomy to such Profit Centres by GEB.

8) Achieve commercial viability in distribution.

9) Transfer of transmission assets from GEB to GETCL.

10) Second tariff submission by GEB to GERC.

11) Preparation of Reorganisation of Plan.

12) Establishment and operationalisation of GERC under the proposed Gujarat Electricity Industry (Reorganisation and Regulation) Act.

13) Undertake Energy Audit in order to reduce system losses by utilities as per Gol Guideline.

14) Consumer awareness programme, with special emphasis on rural consumers on reform process.

Transmission :

For the Renovation and Modernisation and life extension plans of the Thermal Power Stations of Dhuvaran, Panendhro, Ukai, Gandhinagar etc. necessary finance will be provided through APDP and PFC.

Renovation And Modernisation Of Thermal Power Stations :

GoG/ GEB will identify critical transmission and sub-transmission lines for which expenditure of Rs.250 crore is estimated. PFC will provide necessary finance for these projects, in a phased manner.

Strengthening of Sub-Transmission and Distribution System:

Financial support would be extended to enable Gujarat to upgrade its Sub-transmission and distribution network in a phased manner.

Reduction in T&D losses :

• Technical consultancy assistance would be provided for studies for system loss reduction programmes.
  
• Financial assistance would be provided for executing the system loss reduction programme.

Grid Discipline :

Ministry of Power will take necessary steps to ensure enforcement of Grid Discipline among the beneficiary States as well as Central Sector Generating Stations. Gujarat will maintain grid discipline, comply with grid code and carry out the directions of Regional Load Despatch Centre.

Financing :

In recognition of Gujarat being a major reforming State, Power Finance Corporation would be prepared to finance its investment needs in relaxation to exposure limit, ROR and DSCR.

Studies for reforms and restructuring would be funded by PFC through grants and interest free loans.

For R & M of generating stations, sub-transmission and distribution financing would include an element of grant and lending at concessional rates to the extent feasible in recognition of Gujarat as a pioneering reforming state.

Structural Adjustment :

Taking note of the need for structural adjustment financing for successful completion of reforms, Ministry of Power would fully assist Gujarat in raising funds for the purpose from financial institutions and other sources.

Thermal Power Development :

For the 2X250 MW SIKKA TPS UNIT 3&4, the Ministry of Power would assist in financing for the project estimated cost of Rs.2500 Crores.

Rural Electrification :

In order to accelerate the rural electrification programme REC would provide the requisite funds. To the extent necessary rescheduling of past loans would be undertaken.

Additional Allocation Of Power For Distribution :

The Government of India would allocate additional power from new Central Sector generating stations directly to the commercially Viable distribution centres/companies that emerge through the reform process and which demonstrate their capacity to pay for the power they need, in the event of the refusal by GEB.

• Implementation of the MOU would be monitored every three months.


• This Memorandum of Understanding will be for a period of five years, and will be subject to review annually.

Through this Memorandum of Understanding, both parties affirm their commitment to fulfil the reform activities and achieve the objectives mutually agreed upon in this Memorandum.

Signed this day of l9th January, 2001 at New Delhi.

 

For and on behalf of	For and on behalf of
Government of Gujarat	Government of India
(Vijay Ranchan)	(S. S. Sharma)
Principal Secretary	Special Secretary
Government of Gujarat	Ministry of Power Government of India