Govt showers Rs 16,000-crore bailout to hydropower sector

Package includes 4% interest subvention, low tariff and power-purchase obligation for states

The Centre has decided to provide a Rs 16,000-crore bailout package to the hydropower sector, drowning under a spate of stalled and stressed projects. This is the first package for the power sector provided by the current government.

This package includes a 4 per cent interest subvention to projects with total capacity of 11,639 Mw and the creation of a Hydro Power Development Fund.

The fund would be financed with either coal cess, or from the National Clean Energy Fund or the pool for the Development of North Eastern Region (DONER). This would 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. 

“It is proposed to provide a 4 per cent interest subvention during construction (maximum seven years) and three years after commissioning date (COD) to all hydropower projects (both public and private sector) above 25 Mw, attaining COD within five years of after notification of this policy,” said the proposal from the Ministry of Power, circulated to all stakeholders.

The move also entails 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.

Jyotiraditya Scindia, who was the power minister in the United Progressive Alliance (UPA) government, had also proposed mandatory purchase of hydropower by imposing HPO, but the policy never took off.

The current Minister for Power, Coal, Mines, New and Renewable Energy, Piyush Goyal, has declared this year as dedicated to hydropower. This paper reported recently that a comprehensive policy to resurrect the hydropower sector is in the works and would look at offering central grants.

Source: Ministry of Power

Government officials said they will engage with bankers and financial institutions to modify lending conditions for hydro projects.

“Also, to bring down tariff, the Central Electricity Regulatory Commission would work out some ways,” said a senior official, adding the proposal would be placed for Cabinet approval soon.

With this move, the government intends to meet its Intended Nationally Determined Contributions (INDC) targets, as committed in the Paris Climate Change Summit-2016, said officials. The government has committed to build 40 per cent of its total energy generation from renewable sources.

“We also want fresh investment in the hydropower sector and to make it competitively viable for private players. The first move is to kick-start stalled capacity,” said an official.

The tariff of hydro power is currently about Rs 3-3.15 per unit; for the stranded plants, the rates have shot up to Rs 6-7 per unit.

Till now, hydro power projects below 25 Mw were considered under renewable energy and also fell in the administrative purview of the Ministry of New and Renewable Energy (MNRE). Large hydro projects are with the Ministry of Power and so is the largest hydro power company, NHPC.

During the UPA era, hydro power was given a boost, with large scale allocation of projects to the private sector. Arunachal Pradesh alone awarded close to 60,000 Mw to 130 companies. However, almost none of these has been commissioned because of regulatory and legal issues.

The installed capacity of hydropower projects has remained at about 40,000 Mw for the past three years, while that of the renewable energy sector has increased about 20 per cent. In the past decade, renewable energy (solar and wind power) grew 89 per cent, while hydro trailed behind with only 28 per cent growth.