Govt's plan to revive hydropower projects in limbo due to lack of funds

The government’s plan to revive stalled hydropower projects through a bailout package of Rs 160 billion is lying in a limbo for a year now. Lack of funds through budgetary support is a major reason for the delay, as the finance ministry asked the ministry of power to rework the scheme.

Last year, the Centre drafted Rs 160 billion package to revive projects with a capacity of nearly 11,000 Mw. This includes 4 per cent interest subvention to projects totalling 11,639 Mw, creating a Hydro Power Development Fund (HPDF).

The proposal mentioned that the fund would be sourced from either the Coal Cess or the National Clean Energy Fund or the fund pool for Development of North-East Region (Doner). It was to be granted to under construction and stalled hydropower plants — public and private, said the proposal for ‘Revival of the Hydro Sector’ reviewed by Business Standard. However, all cess is now subsumed under the new goods and services (GST) regime.

Government officials said the finance ministry asked the power ministry to rework the scheme and reduce dependence on budgetary support. The power ministry is yet to submit its revised report.

Sources in the finance ministry said that the last time they held discussions with the power ministry was during the time of ex-Finance and Expenditure Secretary Ashok Lavasa, who retired in October last year. During Expenditure Secretary Ajay Narayan Jha’s tenure, there has been no discussion between the expenditure department and the power ministry on the hydro policy.  

“The matter is under inter-ministerial consultations. Some under-construction plants, which are going to be commissioned in the next five years. We are working on what kind of support these plants would need and see if that can be provided. There are issues like cost escalation, some of them are stuck in NGT or there are technical issues. Other than that there is some financial support. Earlier, it was envisaged as interest subvention but now we are thinking in the form of budgetary support. This is under discussion,” A K Bhalla, secretary, Ministry of Power told Business Standard via mail.

He added that in three to four weeks, the ministry should be able to resolve these issues and then go to the Cabinet. “The scheme will cover all three types of projects — central, state and private projects. The ones under construction can be completed in five years,” Bhalla said.

Then Minister for Power and New and Renewable Energy, Piyush Goyal, had declared 2017 as the year for hydropower. The policy had also proposed declaring all hydro projects as renewable energy and there would be a separate ‘Hydropower Purchase Obligation (HPO)’ for states to mandatorily purchase hydel power, as is the case with other renewable sources. Ministry of New and Renewable Energy officials said the matter was awaiting final approval.

Jyotiraditya Scindia, who was the power minister during UPA regime, had also proposed mandatory purchase of hydropower by imposing HPO, but the policy never took off.

Hydropower during the UPA era was given a boost with large scale allocation of hydropower projects to the private sector. Arunanchal Pradesh alone awarded close to 60,000 Mw of hydro projects to 130-odd companies. However, almost none of the projects have been commissioned due to regulatory and legal issues.

The installed capacity of hydropower projects has remained at around 40,000 Mw for the past three years, while that of the renewable energy sector has increased about 20 per cent in the same period. In the past decade, renewable energy (solar and wind power) has grown by 89 per cent while hydro has grown only 28 per cent.