POLICY ON DEVELOPMENT OF HYDRO POWER PROJECT

Energy Department

Government of Bihar

2012

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Table of Content

1. Objective

2. Title and Enforcement

3. Scope and Coverage

4. Nodal Agency

5. Classification of Projects

6. Allocation of Projects

7. Policy Framework

8. Allotment of Land

9. Taxes and Duties

10. Tariff

11. Sale of Power

12. Wheeling /Banking Charges

13. Transmission of Power

14. Despatch

15. Incentive by Central/ State Govt

16. Time limit for executing projects

17. Due Diligence

18. Overriding Condition

19. General Condition

Prepared by BHPC

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DRAFT

Hydro Power Policy - 2012.

Power is a critical requirement for socio economic development. Economic

growth depends on availability of adequate, reliable and quality power at competitive

rate. Bihar is on its path of progress but its sustainable growth is suffering due to non-

availability of adequate power. The per capita power consumption in the state is

around 100 units against the all India average of approx. 700 units. The total installed

capacity of generation in Bihar is around 600 MW against the average demand of 2500

MW and peak demand of 3000 MW. The state has access to 1846 MW including capacity

allocation from central sectors generating stations. The deficit in power which was

around 31 % in 2007-08 has increased to 40% in 2009-10. This is leading to rationing

of power to different categories of consumers. Govt. of Bihar is making its best effort to

increase its generating capacity to bridge the gap. In this process in additional to adding

thermal power projects; it endeavours to exploit hydro power potentials of the state

through its own agency as well as active participation of the Independent Power

Producers (IPP).

1 Objective :

Power system in Bihar is predominant by thermal power generation and the

contribution of hydro power is only 5%. In order to exploit the available renewal

source of energy, Govt. of Bihar is desirous and committed to encourage rapid

development of hydro power in the State at the earliest. The key objective of the policy

is as under.

1.1 To enhance the over all generation capacity of the state including Hydro

power

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1.2 To obtain optimal thermal - hydro generation mix of 60:40 ratio

1.3 To encourage the participation of Independent Power Producers by offering

them best policy frame work, and support.

In order to achieve the above objective, the Govt, of Bihar had issued a policy

guideline for private sector participation for developing non-conventional energy

sources in 2003 which included policy for hydro energy. Keeping in view the fast

changing scenario of the Power sector and the guiding policies of the Central/State

Govt., it is felt necessary to review the earlier policy and bring in new Hydro Power

Policy covering projects of all sizes/capacities.

2 Title and Enforcement

2.1 This policy would be known as Bihar State Hydro-power Policy -2012.

2.2 This policy will be effective from the date of its notification.

2.3 The Govt. of Bihar may modify this policy through amendments ( if required).

However, subject to such amendments, this policy will remain valid for a

period of 5 years. All projects awarded within this period under this policy will

be governed by this policy for their entire duration of the project.

3 Scope and Coverage

3.1 The policy will be applicable for development of hydro-power projects from

micro to mega capacity. The Govt. of Bihar has already issued a policy

framework for development of new and renewable energy sources which

includes hydropower projects up to 25 MW vide Resolution dated 24.06.2011.

This policy is in line with aforesaid policy for hydropower projects up to 25 MW

capacity. However, in case of any ambiguity between the two policies, the

provisions of Hydro power policy would prevail upon policy for New and

Renewable Energy Source.

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3.2 The policy covers aspects and process of inviting proposal in terms of

Tender/Expression Of Interest from prospective Developers, guidelines for its

evaluation, project approvals, award process and project implementation.

3.3 The policy will be applicable for new projects proposed after its notification.

3.4 The policy will be applicable for following categories of Developer desirous to

develop Hydro Power stations in the State.

3.4.1 National / international organizations,

3.4.2 Central / State Govt. undertakings,

3.4.3 Private Industries/ institutions, partnership firms/ consortium

3.4.4 Panchayati Raj Institutions/ Urban local bodies/ Co-operative and

Registered societies. desirous of install, and generate hydropower in

state.

4. Nodal Agency

At present Bihar State Hydroelectric Power Corporation (BHPC), (A Govt. of

Bihar Enterprise), registered under Company Act 1956 is responsible for

development of hydro power projects in the state.

Under Bihar State Hydro-Power Policy -2012, BHPC will be the Nodal Agency

on behalf of, Govt. of Bihar for notifying hydropower locations, inviting proposals,

examining the techno-commercial feasibility of projects (under the purview of the

State), its processing, conveying govt. approvals, approving technical proposals

and monitoring physical progress of the work. The technical appraisal for the

projects under the purview of Central Govt. will he done by the Central Electricity

Authority (CEA) as per provision of Indian Electricity Act. 2003.

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The approval for investment proposals for projects under the purview of State

Govt will be given by BHPC and for projects under the purview of Central Govt. will

be given by an Inter-Departmental committee of the Govt. of Bihar (to be

notified separately).

The list of hydro power projects for development by Independent Power

Producer (IPP) will be notified by BHPC from time to time in its website.

However, the Developers will have option to identify/ select site at its own. In

case of new sites, Pre- feasibility reports / DPR will be prepared by the developer

and same will be submitted to BHPC for its techno-commercial appraisal/

approvals before award of sites.

5. Classification of Projects

Depending upon installed capacity, the hydro projects are classified as under:

5.1 Micro Hydro projects with installed capacity below 3 MW

5.2 Mini hydro projects with installed capacity from 3 MW to 25MW

5.3 Medium hydro projects with installed capacity above 25MW and upto 100

MW and

5.4 Big hydro projects with installed capacity beyond 100 MW.

6. Allocation of projects

6.1 All the identified potential project/sites shall be advertised through Notice

Inviting Proposals in various news papers for global invitation of bids from

eligible bidders as per the policy framework.

6.2 The projects upto 3 MW will be allocated on input cost basis and preference

will be given to developers within the states. In case of self identified projects

upto 25 MW input based cost may be allowed to the developers.

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6.3 Allotment of identified Projects greater than 3 MW will be based on tariff

based bidding process as per guidelines issued by GoI.

6.4 Successful Bidders shall pay fixed upfront charges to Nodal Agency/Govt. of

Bihar as defined below:

Sl No. Capacity in MW Upfront payment

(lakh)/MW

1 <3 MW 5

2 3-25 MW 10

3 Between 25 and 100 MW 10 ( Max.5 crore)

4 >100 MW 10 crore (fixed)

6.5 The cost of Detailed Projects Reports and Project development charge shall

be recovered from the successful bidders.

6.6 Acceptance of offer: Government shall have power to accept or reject the

offer considering the financial viability and other parameters at its

discretion.

6.7 The Developer shall have the option for setting up the project under a Special

Purpose Vehicle (SPV) as defined in the Electricity Rules under EA 2003.

7 Policy Framework

7.1 Once approved, the developer will not be allowed to change its core structure

including equity holding and transfer its right to others entity / interested

party till the completion of the project. However, in post completion period

change in Company structure may be allowed with prior written approval

from Nodal Agency / Govt. of Bihar.

7.2 After allocation of site/ project, the developer need to sign an implementation

agreement (IA) within three months from the date of allocation with

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mutually agreed milestone including financial closure for implementation of

the project.

7.3 The project will be allotted on the basis of tentative installed capacity as

mentioned in the notice inviting proposal and on self identified basis. The

nodal agency shall ensure that the self identified projects do not interfere

with other existing / identified projects.

7.4 In case the capacity of awarded project increases / decreases by 20% , the

award conditions will not change . But in case of higher deviation in declared

capacity i.e. beyond 20% , the developer shall be required to sign a

fresh/revised MOU/IA with the Govt. of Bihar.

7.5 The scope of work would include all aspect from concept to commissioning

and operation thereafter. The transmission system for evacuation of power

shall form part of the project cost and it will be finalised in consultation with

power distribution Company and nodal agency and this will be applicable for

micro and small hydro power projects also.

7.6 The project developed by private developers on Build – own –operate –

transfer (BOOT) model would have a validity period of 40 years from the

date of commissioning of the project and the same would revert back to the

Govt. of Bihar after the expiry of this time i.e. 40 years free of cost with all

encumbrance.

7.7 By virtue of its presence in the area , the developer company will have no

right on other proposed / identified project sites in upstream and

downstream of the water stream.

7.8 The developer shall provide 12% free power to the state as royalty. Out of

above 12%, 2% free power will be provided to the surrounding areas

/villages in the radius of 1 km from the project site as social obligation and

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the distribution infrastructure required has to be develop by the project

developer in consultation with distribution company and nodal agency. In

case of projects upto 3 MW the quantum of free power will be 2% for social

welfare.

7.9 The developer company will meet all statutory rules and regulation likes

labour laws, safety norms, environmental laws and all norms imposed by

other local authorities from time to time.

7.10 The nodal agency or any other regulatory body of central / state Govt. will

have right to inspect the generating stations and its allied structures at

reasonable interval and time to ensure security and safety of the

installations . The regulating instructions in respect of operation of project

as well as its safety and security of the system will be binding on the

operating company failing to which the Govt. will have right to take over the

project with due compensation to developer.

7.11 In case of storage type projects , minimum quantity of water as decided by

the state Govt. shall be released in the down stream even during lean

discharge period and at the cost of generation .

8 Allotment of land

8.1 Once the project site is awarded to developer, the developer will acquire land

from its owner as per norms defined by thee government. If required, the

nodal agency will extend help in coordinating activity with Govt.

departments.

9 Taxes & Duties:

9.1 All entry tax and electricity tax will he exempted for projects upto 25 MW.

9.2 All other taxes and duties as applicable from time to time by State

Government/local bodies shall be paid by the developers.

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10 Tariff

10.1 The tariff for sale of energy from the project shall be decided by Bihar State

Regulatory Commission through tariff based bidding in case of identified

projects >3 MW or on the basis of actual project cost in case of self identified

projects upto 25 MW and identified projects upto 3 MW. In case any

government subsidy is provided in development of project, such component

of project cost shall be excluded for determination of tariff.

10.2 In case of sale of energy to any particular bulk consumer or the definite

group of people/cooperative/society(having load requirement of 1MW and

above) the mutually agreed tariff rate between the developer company and

consumer unit shall be allowed.

11 Sale of Power :

11.1 For Micro projects upto 3 MW capacity, the developer company will have

option to consume power in the local vicinity in the capacity of decentralised

distributed generator. He will have option to feed a surplus power for any of

the local grid of Distribution Company at the rate of tariff notified by

Regulatory Commission.

11.2 For Mini hydroelectric project i.e. upto 25 MW the developer company will

have to make agreement with Distribution Company for use of its distribution

network on mutually agreed terms & conditions or they have to construct

suitable sub transmission facility to deliver the power to the nearest GSS/PSS

of the distribution company. The applicable tariff for such power shall be as

per approved rate by BERC.

11.3 The project developer may sell to third party/utilize generated power at the

place of generation or at any other place for the captive use, through BSEB

network on payment of applicable Open Access charges surcharges &

BSEB

suggested

its deletion

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additional surcharge and any other charges as approved/notified by Bihar

Electricity Regulatory commission (BERC) and as per BERC (Terms &

Conditions for Open Access) Regulation, 2006 as amended from time to time.

11.4 A separate Power Purchase agreement in this respect shall be signed by the

IPP and Distribution Company as per provisions contained in Electricity Act,

2003 and subsequent amendment/ notifications issued by CERC/ BERC from

time to time.

11.5 For Hydro power projects above 3 MW, the BSEB shall contract to take off

minimum 60% of the total power for sale at the rate notified by Regulatory

Commission. The Developer will have the option to sell the remaining 40% of

the total power to any HT consumer.

12. Wheeling/ Banking Charges:

12.1 The infrastructure and facilities of BSEB/DISCOMs, as may be available, will

be made available to all IPPs for wheeling the generated on chargeable

basis.

12.2 Wheeling charges for wheeling the generated energy to bulk

purchaser/third party consumers inside or outside the State will be as

determined by the Bihar Electricity Regulatory Commission (BERC).

12.3 No wheeling charges are applicable in cases of sales to the BSEB/Successor

Company in case power is supplied directly to BSEB.

13 Transmission of Power

13.1 For projects above 25 MW capacity the detailed project for power

evacuation system will be indicated in the DPR and the total evacuation

system shall either be constructed by the developer company at its own

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cost or it may be developed by the Distribution Company of the area on its

behalf on deposit basis.

13.2 BSEB will determine the specifications of the evacuation facilities required,

including the interconnection point and voltage and the same would be

specified in the project information document (PFR/DPR).

13.3 Construction and maintenance of transmission facilities up to the nearest

interconnection point as directed by the Board shall be such that

interfacing with the State grid/BSEB grid is done as per the latter's

specifications & requirements/Indian Electricity Grid Code/ Bihar Grid

Code as applicable and amended from time to time.

14 Despatch

14.1 In order to promote use of renewable sources, priority will be accorded for

hydro projects over other source of energy during preparation of

generation schedule. This point will be ensured by State Load Despatch

Centre.

15 Incentives by Central/State Government

15.1 The financial/fiscal incentives for small hydropower development available

from Ministry of Non Conventional Energy Sources, Govt. of India shall be

facilitated/extended to IPPs

16 Time Limit for Executing the Project

16.1 The IPPs shall make necessary applications for obtaining the statutory

clearances of the project and approvals of the concerned authorities shall

be responsible for completeness of all submissions within 6 months from

the date of allotment or any other period deem fit by the GOB. Failure to

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do so within the stipulated time frame shall be treated as non-compliance

with the requirement stipulated in this paragraph.

16.2 Nodal Agency shall accord the approval of the DPR/ application within 3

months from its submission. IPP shall enter into an implementation

agreement with the nodal agency within one month from the date of

approval of the project or three months from issue of letter of intent as

the case may be.

16.3 The IPP/Users society 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 or signing of the Implementation

Agreement. 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.

16.4 The project should be made operational within 24 to 60 months (depending

on the capacity of the project and as specified in the IA) from the date of

Financial Closure.

16.5 The failure to reach the milestone mentioned in 16.1 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/Users society in such instance.

16.6 The failure to reach to milestone as in 16.2 above would result in a liability

to pay penalty by the IPP to the GOB, computed at the equivalent royalty

revenue that would have been payable to the GOB 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.

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16.7 The IPP may surrender the allotment back to GOB if on completion of the

DPR, within the stipulated time frame, if it has grounds to establish that

the project is not techno-economically viable. On such surrender, the GOB

would refund any premium amount paid by the IPP till the date of

surrender.

17 Due Diligences

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 Over riding condition :

18.1 Government of Bihar reserve the right to withdraw award of

project/stopped operation of project in case the pattern of use of water

changes in the locality due to municipal/irrigational /environmental

reasons etc.

18.2 The Government or its authorised representative will have right to inspect

the power stations to ensure implementation of statutory norms like

labour rules/safety/operation norms etc..

18.3 The project developer will have no right for consumptive use of water

unless it is specifically mentioned in the contract or separately allowed

by competent authority.

18.4 In case situation arises leading to any of the above condition, the State

Government will have right to takeover the power projects for operation

by Government Agency or renegotiate the terms with the Developer after

due compensation.

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19. General Condition :

This policy supersedes all the policy guideline instructions issued in past

including earlier hydro energy policy, 2003.

Notwithstanding anything contained in the forgoing sections the Government of

Bihar reserves the right to modify/amend/relax/issue clarifications in this policy

guideline. The interpretation by Govt. of Bihar on any clause/matter contained in this

policy documents shall be final and binding to all concern.

By order of the Governor of Bihar,

Principal Secretary (Energy) Govt. of Bihar