Uttranchal

Memorandum of Understanding Between Ministry of Power, Government of India And The Government of Uttaranchal

THIS MEMORANDUM OF UNDERSTANDING is made between the Ministry of Power, Government of India, and the Government of Uttaranchal to affirm the joint commitment of the two parties to upgrade the quality of service in the power sector in Uttaranchal, and to carry forward the process of power sector reform initiated in the erstwhile Uttar Pradesh and reiterated in the Memorandum Of Understanding of 25.2.00 between the Government of Uttar Pradesh and the Government of India, and to set out the measures which Uttaranchal will implement, and the support that the Government of India will provide.

I. PREAMBLE:

Uttaranchal is committed to upgrading services in the power sector with a view to providing commercial viability and quality 24-hour power at affordable rates to all its residents.

Following the creation of Uttaranchal on 9-11-2000, the State continues to be served, under the provisions of the U.P. Reorganization Act, 2000, and the U. P. Electricity (Reforms) Act, 1999, by the U.P. Power Corporation Ltd. and the U.P. Jal-Vidyut Nigam Ltd. The State is accordingly engaged in the process of unbundling of activities, assets, and staff of the UPJVNL and the UPPCL, and has decided to establish independent power Generating and Distribution & Transmission Corporations, and is taking steps in this direction. The support of the Government of India, as provided for under the provisions of the U.P. Reorganization Act, 2000, will be requested as and when necessary to ensure that the distribution of assets and liabilities between the states is just and equitable.

The U.P. State Electricity Regulatory Commission (SERC) which has been vested with full power under the U. P. Electricity (Reforms) Act, 1999, continues to exercise jurisdiction over Uttaranchal. The State Government commits itself to extending full support to the Commission in exercise of its statutory duties.

This Memorandum of Understanding between the Ministry of Power, GOI and the Government of Uttaranchal sets out the steps that the State Government will undertake in a time bound manner to further the process of restructuring and the support which the Government of India would give to the Government of Uttaranchal.

II. REFORM PROGRAMME OF UTTARANCHAL

Uttaranchal will establish an independent Corporation the Uttaranchal Power Corporation Limited for the transmission and distribution of electricity, by 31/3/2001.

Uttaranchal will likewise establish an independent Corporation the Uttaranchal Jal Vidyut Nigam Limited for the generation of electricity, by 31/3/2001.

TRANSMISSION

Uttaranchal proposes to strengthen/upgrade the transmission, sub-transmission and distribution systems, taking the sub-station as a unit. For this, an expenditure of approximately Rs. 266 crores (Rs. 32.45 crores on R&M schemes and Rs. 233.13 crores on new schemes) is estimated.

ENERGY AUDIT

Uttaranchal will undertake Energy Audit at all levels in order to reduce system losses to bring them progressively to the level of 20% by March 2004. This would be done in a time bound manner, and will include the following steps:

a) With a view to minimizing loss at the point of receipt, Uttaranchal will undertake joint verification and sealing of interface points with power suppliers.

b) Efforts will be made to meter all 11 KV feeders by 31/3/2001 in no case later than 30/9/2001.

c) Approximately 80% metering is estimated in the rural areas of Uttaranchal. With a view to reducing/eliminating power theft, 100% metering of all consumers will be done by 31.12.01.

d) The number of billing and collection centers, and of computerized billing centers will be increased in the urban areas by 31.12.01

e) Identified distribution circles, such as Dehradun/Mussoorie, Kashipur, Ramnagar, etc. will be developed as profit centers. Separate commercial accounts/shadow Balance Sheets for such centers would be prepared from 31.3.01.

f) If commercial viability in distribution is not attained by 31/3/2003, corporatization/cooperatization/privatization of distribution, will be considered.

g) Uttaranchal will also consider innovations such as the creation of user groups/peoples' cooperatives to oversee LT distribution in composite clusters and to take over the responsibility of billing, collection, theft detection, etc. These steps would include involvement of local panchayats, and will be based on lessons in public participation learnt from successful projects such as SWAJAL.

RURAL ELECTRIFICATION

Of the total number of 15671 villages in Uttaranchal, 12384 or 79 % stand electrified. The state will endeavour to reach 100% electrification by 2007.

ALLOCATION OF POWER

A. Uttaranchal is a power surplus state in the sense that even current levels of generation are in excess of demand. The state will endeavour to establish 24-hour power supply in all parts of the state at the earliest.

B. The unexploited hydro potential of the state is estimated at 20,000 MW. Towards developing these resources to work for the benefit of the state, the Government of Uttaranchal will,

a) develop a policy for encouraging micro-hydel generation projects in the private sector, on the basis of a transparent selection policy, and will resolve issues like distribution rights/power purchase agreements, etc. in a quick, streamlined manner;

b) develop likewise a policy for setting up medium/large hydroelectric projects, with the potential participation of NHPC, THDC, NTPC, etc. while always keeping in mind the environmental concerns associated with large dams.

D Uttaranchal will also develop a policy to encourage other renewable sources on lines similar to the policy for micro-hydel units.

GENERATION

The Renovation & Modernization (R&M) of hydroelectric stations is a major priority for Uttaranchal, especially major, prestigious projects such as Chibro. For all such projects in Uttaranchal, the requirement of funds is estimated at Rs. 170 crores, of which Rs. 26 crores covers small hydro projects, and Rs 144 crores covers large and medium projects. The PFC will provide assistance, subject to the projects submitted by UPJVNL/the proposed Uttaranchal JVNL being found viable.

HYDRO POWER DEVELOPMENT

A. Uttaranchal is committed to the commissioning on time of the Tehri Hydro- Electric Project, which is a project of the highest national importance.

B. The Maneri Bhali Phase II (304 MW) and Lakhwar Vyasi (420 MW) hydro electric projects would be taken up and completed as joint venture projects.

Similarly, the hydroelectric power potential of the entire Bhagirathi basin would be fully developed as a joint venture.

C. Power generated from all such projects would be fully committed to the development of Uttaranchal and would be allocated to the proposed Uttaranchal Power Corporation or to other agencies which have the capacity to pay for this power.

GRID DISCIPLINE

Uttaranchal will maintain grid discipline, comply with the Grid Code and carry out the directions of the Regional Load Despatch Centre.

MISCELLANEOUS

Tariff orders issued by SERC will be implemented fully unless stayed or set aside by court orders.

III. SUPPORT FROM GOVERNMENT OF INDIA

The Government of India will provide financial support through APDP for -

(a) R&M and LE of Hydro Power Stations.

(b) Strengthening of sub-transmission, distribution and metering in three identified circles.

HYDRO-POWER DEVELOPMENT

a) The Ministry of Power will work closely with Uttaranchal to fully develop exploitable hydro-potential by 2020.

b) The Ministry of Power will actively assist the Government of Uttaranchal in raising resources including external aid for development of hydel projects.

TRANSMISSION & DISTRIBUTION

The Govt. of India will assist in arranging funds through PFC / other Financial Institutions for undertaking augmentation, up-gradation and improvement of critical transmission lines in Uttaranchal.

FINANCING

In recognition of the fact that Uttaranchal is a new state, which is oriented towards reform and efficiency, the Power Finance Corporation(PFC) would be prepared to finance its investment needs in relaxation of normal conditionalities relating to exposure limit, ROR and DSCR. PFC will also provide grants and interest free loans for detailed studies related to reorganization and the establishment of reformed structures.

The PFC would provide funding on concessional terms for metering of all consumers by December 2001 and computerized billing centres.

The financing of R&M of generating stations, sub-transmission and distribution, would include an element of grant and lending at concessional rates to the extent feasible in recognition of the special needs of Uttaranchal.

The State is committed to develop its power policy, including its policy on small hydro projects and on the use of renewables. The Government of India will support all such activities, including the engagement of appropriate institutions/experts for the purpose.

III .IMPLEMENTATION:

The implementation of this Memorandum of Understanding would be monitored every three months. It will be valid for a period of five years, and will be subject to annual review.

Through this Memorandum of Understanding, both parties affirm their commitment to the integrated development of the power sector in Uttaranchal and to achieve the objectives mutually agreed upon in this Memorandum.

Signed this day the 30th March, 2001 at New Delhi

For and on behalf of	For and on behalf of
Government of Uttaranchal	Government of India
(P. Jyoti Rao)	(Ajay Shankar)
Resident Commissioner	Joint Secretary
Govt. of Uttaranchal	Government of India

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