Big potential for small hydropower

Centre to renew central finance assistance

As part of its target of building the capacity for 175 gigawatt of renewable energy by 2022, the Ministry of New and Renewable Energy (MNRE) will give a policy push to small hydropower.

Comprising power projects of less than 50 megawatt (Mw) and mostly run of the river units, the target of small hydro in the overall mix will be increased to 6,000 Mw. It was earlier 5,000 MW.

The government will also renew central finance assistance (CFA) given to small hydropower projects.

“These incentives expired but they were extended. By the next fiscal year, new incentives would be finalised. The subsidy given to small hydropower projects would also be enhanced,” said a senior official.

Small hydro projects receive a CFA of Rs 1.5 crore per Mw, with a cap of up to Rs 5 crore in the case of central projects, and Rs 7.5 crore per Mw, with a cap of up to Rs 20 crore for state projects.

Officials said the cap would be raised to Rs 30 crore per Mw.

The industry is welcoming the change, but wants a strengthened approval process in place for the projects. 

“Currently the gestation period for a small hydro project is three-four years and the subsidy disbursement period is the same. Most of the projects miss the financial assistance they remain stuck with either state departments or the Ministry of Environment and Forest. A single-window clearance would go a long way in helping small hydro sector,” said Vikram Aggarwal, managing director, Virtuaal Infra, a hydro energy player.

As small hydropower projects are usually near small rivers and streams, the power is to be given free to farmers after cross-subsidisation by states.

“However, in lieu of water usage and other capital involved, most states levy several types of cess and tax, thereby negating the financial assistance from the Centre. We have invited states to discuss the issues faced by the sector. We are looking to have statewise policies and for that dialogue will now be opened with them,” said an MNRE official.

The move is in line with the government’s push to increase the renewable energy basket and meet the Intended Nationally Defined Contribution (a concept that emerged in the climate change convention in 2015) target of producing 40 per cent of the country’s energy needs through clean sources. 

Large hydro revival is also under review with a Rs 16,000 crore package with interest subvention and tax benefits by giving it renewable status. The proposal is awaiting Cabinet approval.

POWER ON TAP

 

 Incentives to be revised for small hydropower sector 

• Target to be raised by 1,000 megawatt (Mw) to 6,000 Mw by 2022. Current capacity is 4,000 Mw
   
• Small hydro includes run of the river power projects up to 50 Mw
   
• Subsidy cap to be increased to Rs 30 crore for project
   
• Statewise subsidy to be reviewed. Centre to pursue states to remove taxes on small hydropower sector
   
• Industry wants speedy single window clearance