GUIDELINES FOR POWER GENERATION, TRANSMISSION AND DISTRIBUTION IN SPECIAL ECONOMIC ZONES (SEZs)

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GOVERNMENT
OF INDIA
MINISTRY OF
COMMERCE & INDUSTRY
DEPARTMENT OF
COMMERCE
(SEZ DIVISION)
UDYOG BHAWAN
NEW DELHI 
Dated: 16th February, 2016 
SUBJECT: GUIDELINES FOR POWER GENERATION,
TRANSMISSION AND DISTRIBUTION IN SPECIAL ECONOMIC ZONES
 (SEZs) REGARDING 
Power
Guidelines for power Generation, Transmission and Distribution in Special
Economic Zones (SEZs) were issued on 27th February, 2009
and subsequently replaced by the guidelines issued on 21st March, 2012.
These guidelines were further reviewed and guidelines dated 21st March, 2012
were withdrawn vide letter dated 6thApril, 2015. Representations
have been received in the Department for restoring the O&M benefits to
Developers operating power plants in SEZs. The matter has been examined and in
supersession of all previous guidelines issued by this Ministry, the following
guidelines are hereby prescribed for generation, transmission and distribution
of power in Special Economic Zones:- 
(i). A power
plant, including non-conventional energy power plant, to be set up by
developer/co-developer in an SEZ as part of infrastructure facility will be in
the Non-Processing Area of SEZ only, and will be entitled to fiscal benefits
only for its initial setting up and no fiscal benefit would be admissible for
its operation and maintenance. There will be no obligation to achieve positive
Net Foreign Exchange (NFE) for such power plants. Such a power plant can supply
power to DTA after meeting the power requirement of the SEZ subject to payment
of customs duty as determined by DoR keeping in view the duty foregone on
initial setting up of the power plant. 
(ii).
Henceforth, no single stand-alone power plant will be permitted to be set up in
an SEZ in which there would be no other units. 
(iii).
Henceforth, setting up of captive power plant, including non-conventional
energy power plant, can be permitted in Processing Area as a unit, and it will
be subject to NFE obligations. Such a power plant will be entitled to all the
fiscal benefits covered under section 26 of the SEZ Act including the benefits
for initial setting up, maintenance and the duty free import of raw materials
and consumables for the generation of the power. They can sell power to DTA on
payment of customs duty as determined by DoR keeping in view the duty foregone
on installation, as well as O&M, and including service tax exemption. 
(iv). With
respect to the IT/ITES SEZs, which require continuous quality power, wherever
generation of power has been approved by the BoA, as authorized operation, to
the Developer/Co-developer within the processing area, and in respect of which
there is a statutory requirement on developer/co-developer to supply 24 hours
uninterrupted quality power supply at stable frequency in the Zone, in terms of
Rule 5A of SEZ Rules, 2006; in such cases generation of power will be carried
out as a unit within the processing area, and such a power plant including
non-conventional energy power plant, will be entitled to all the fiscal
benefits covered under section 26 of the SEZ Act including the benefits for
initial setting up, maintenance and the duty free import of raw materials and
consumables for the generation of the power. Such duty free imports of capital
goods, raw material and consumables etc. would be counted towards the NFE
obligations of the unit. 
This facility
will also be extended to R&D facilities, Fabless Semi-Conductor Industry,
EMS Electronic Manufacturing Services and such other sectors as may be decided
by the Central Government, from the date of incorporations of these sectors in
Rule 5A of the SEZ Rules, 2006. 
They can sell
power to DTA on payment of customs duty as determined by DoR keeping in view
the duty foregone on installation as well as O&M including service tax
exemption. 
(v). SEZs which
are connected to State/National Grid, will be allowed to create a back-up power
facility. Such power back-up facility, if it is in the NPA, only duty benefits
on capital expenditure for setting up will be available. If the facility is in
processing area, then, duty benefits for setting up as well as O&M will be
available, subject to the condition that the facility shall be NFE positive
either stand-alone or along with the unit with which it is attached. For DTA
sale, customs duty would be charged in both the situations i.e. a power back up
utility in NPA or PA at the rate prescribed for each situation/location. 
(vi). Those
Power Plants in SEZs which were approved prior to 27.02.2009, and subject to
issue of Power Guidelines and provisions of SEZ Act & Rules, either as an
infrastructure facility by Developer/Co-developer or as a unit in the Processing
Area, will be permitted to operate. It is relevant that during period of
installation of such plants, duty benefits on capital investment of mega power
plants were available under the then prevalent policy guidelines even in the
DTA area. 
Henceforth,
such power plants will be allowed O&M benefits only with regard to the
average monthly power supplied to entities within the same SEZ during the
preceding year. Henceforth, no O&M benefits including service tax exemption
will be allowed for power supplied to DTA/other SEZs/EOUs from such power
plants. The surplus power generated in such power plants may be transferred to
DTA, without payment of duty, keeping inconsideration of the fact that no duty
free benefits on raw materials, consumables, etc. have been availed for
generation of such power. However, those power plants not having the capacity
of the mega power plant, as given in DoR Notification No. 21/2002-Customs dated
1.03.2002, will be required to pay duty for sale in DTA, on account of duty
free import of capital goods, as determined by DoR. 
2. These
guidelines would be effective with effect from 16th February, 2016. 
3. This has the
approval of Hon’ble Commerce & Industry Minister.
(T.V. RAVI)
Director (SEZ) 16 Tel: 23063960
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