New hydro power policy soon

The government is looking at a policy push to resurrect the languishing hydro power sector.

Officials said this would cover projects of the private sector and those of state-owned NHPC.

“The government is looking at financial incentives. Interest subvention would be supported with central funding for at least half the interest payment. (More of) Tax depreciation would help bring private sector interest,” said a senior power ministry officer, requesting anonymity.

Also, to keep the cost of power from upcoming hydro projects under check, the government would look at regional pooling on rates. Hydro power supply is currently at Rs 3-3.15 a unit; for stranded plants, these have shot up to Rs 6-7 a unit.

“A focus on hydro is the final piece of the puzzle, with renewables taking off. If appropriate structuring and risk framework can make hydro competitive and get it dispatched within the merit order, it will provide an added advantage of stability to the grid,” said Sambitosh Mohapatra, partner (energy) at consultancy PwC India.

Hydro power projects below 25 Mw are considered to come under renewable energy and in the administrative purview of the ministry of new and renewable energy. Large hydro is with the ministry of power and so is NHPC, the largest hydro power company.

With this, the government intends to meet its Intended Nationally Determined Contributions  targets as committed in the Paris Climate Change Summit of 2016, said officials. 

Hydro power during the earlier UPA government saw large-scale allocation of projects to the private sector. Arunanchal Pradesh alone awarded close to 60,000 Mw, to about 130 companies. However, almost none have been commissioned, due to regulatory and legal issues. Installed capacity of hydro power projects has remained at around 40,000 Mw for the past three years. 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 seen 28 per cent gain.

Power Play

• Hydro power projects below 25 Mw are considered to come under renewable energy
• Large hydro projects come under the ministry of power and does NHPC, the largest hydro power company
• Installed capacity of hydro power projects has remained at around 40,000 Mw for the past three years
• Hydro power supply is currently at Rs 3-3.15 a unit; for stranded plants, these have shot up to Rs 6-7 a unit
• In the past decade, renewable energy (solar and wind power) has grown by 89 per cent, while hydro has seen 28 per cent