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Sugar mills to get incentives hitherto available to IPPs: draft cogeneration policy readied




  • The federal government has drafted a new co-generation policy for sugar mills, according to which all fiscal and financial incentives that are available to Independent Power Producers (IPPs) will be offered to mills, well-informed sources in PPIB told Business Recorder

    “In order to tap the potential of sugar mills to produce power generation based on bagasse/biomass and coal we have formulated a draft ”Co-gen Policy 2013” in consultations with the mills” representatives,” the sources added. The policy is expected to be submitted to the Cabinet shortly. The Ministry of Water and Power, sources said, has also taken all the stakeholders on board with regard to new co-gen policy. The draft co-gen policy is as follows: 

    1- The company shall, under the provisions of policy of power generation projects 2002, approach PPIB for facilitation in setting up of the co-generation power projects based on bagasse/biomass and coal as fuel using high pressure boilers (minimum 60 bars). 

    2- The policy shall be applicable to all co-generation power projects irrespective of capacity based on bagasse/biomass and coal as fuel, intended to be contracted to the power purchase which is a federal entity, eg, NTDC/CPPA, Discos. 

    3- All fiscal and financial incentives available to the IPPs under Power Policy 2002 including applicable fee and any subsequent amendments/concessions till the date hereof shall be applicable to co-generation power projects under this policy. 

    4- Except as otherwise stated, the provisions of policy of power generation projects 2002, as amended from time to time will be followed. 

    5- Power utilised by the respective sugar mills for self-consumption shall not be charged to the power purchaser. It will be mandatory for the power purchaser to dispatch the hourly declared available capacity by the co-generation power projects during crushing season, failing which the power purchaser shall be liable for liquidated damages equivalent to the energy payment for the relevant hour in addition to the hourly capacity payment. 

    6- The co-generation projects will be developed on a priority basis and there will be no requirement for prequalification, Letter of Intent (LoI) and feasibility study. The company will be issued Letter of Support (LoS) by PPIB after tariff has been determined/approved by Nepra. 

    7- The company will be required to submit grid interconnection studies and initial environment examination reports to relevant agencies/departments. Upfront tariff for bagasse/biomass/coal based co-generation projects shall be determined by Nepra in accordance with the Nepra rules and regulations. 

    8- The company shall have the option to opt for upfront tariff or approach Nepra for a specific determination. A firm Engineering, Procurement and Construction (EPC) contract will not be required in case of an upfront tariff. 

    9- The company shall approach Nepra for issuance of generation licence. Standardised Implementation Agreement (IA) and Power Purchase Agreement (PPA) will be developed by PPIB in consultation with the stakeholders and approved by the competent authority within 45 days of issuance of the policy for co-generation projects. 

    10- The power produced by co-generation power projects will be purchased by NTDC/CPPA or Disco concerned at tariff approved by Nepra. The PPA will be effective for 25-30 years. The cost of interconnection, grid station upgrades, etc, for power evacuation from outgoing bus bar of co-generation power projects shall be the responsibility of the power purchaser. 

    11- Bagasse/biomass and imported/local coal will be consumed as per requirement of the plant without any limitation of inter-changeability. 

    12- It will be the responsibility of the company to make all other arrangements like financing, purchase of land, procurement of machinery and fuel, etc. 

    13- The co-generation plants will be set up under a separate company incorporated under the Companies Ordinance, 1984. The company shall enter into long-term agreement(s) with the respective sugar mill for provision of bagasse and sale of electricity. Option of wheeling of power to bulk power consumers will be available for the co-generation power projects. 

    Copyright Business Recorder, 2013

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