State seeks OERC comments on new small hydro policy

The Orissa government has sought the comments of the Orissa Electricity Regulatory Commission (OERC) on the proposed small hydro policy for the state.

The draft policy framed by the state energy department in consultation with the water resources department has been sent to the Commission. It would be finalized after incorporating the suggestions which may be made by OERC, sources said.

The proposed small hydro policy would be applicable for the developers interested to set up Small Hydro Electricity Projects (SHEPs) with a generating capacity of less than 25 Mw each.

Sources said, various changes have been incorporated in the proposed policy pertaining to the selection of developers, incentives, penalty, bidding and implementation among others.

While the Memorandum of Understanding (MoU) route was adopted and the site was leased out to the developer for 30 years in the present policy framework, these projects are proposed to be allowed on the Build-Operate-Transfer (BoT) basis.

The new policy has laid down clearcut procedures for the selection of developers. As per the policy, the state government would invite bids for development of small hydro projects in January every year for those projects which has been identified.

A developer must submit the project feasibility report duly vetted by the water resources department to the government. Technical ability, financial capability and past experience of the developer in similar project would be taken into consideration while determining the pre-qualifications.

Only the pre-qualified developers would be issued the main bidding document. The minimum upfront premium would be mentioned in the bidding document and the bidder would have to quote a premium payable to the government above the upfront premium.

The developer would have to support his bid through the Earnest Money Deposit (EMD) at the rate of Rs 5 lakh per Mw. If the developer comes out with his own selected site, he has to furnish project feasibility report for the purpose.

On the issue of the development of projects, the policy states that after receiving the letter of permission, the developer should prepare the detailed project Report (DPR) within 12 months. Though the project completion period was 36 months earlier, this has been reduced to 24 months from the date of signing the implementation agreement, in the proposed policy.

The approval of the DPR for a project by the state level technical committee would depend on the viability of the project. The letter of allotment would be issued and the MoU would be signed with a security deposit of 1 per cent of the project cost.

Similarly, the developer may construct and maintain dedicated transmission line from generation plant to destination of use. However, banking of power from hydro projects would be governed by the guidelines of OERC.

With a view to encourage developers to invest in this sector, the new policy has provisions for incentives. As a measure in that direction, it moots exemption of electricity duty on the sale of surplus captive power within the state. This facility would be extended if a developer is eligible under the IPR.

Simultaneously, to discourage the non-serious players, there is provision for penalty both before and after signing of the MoU. The forfeitures of EMD at the rate of Rs 5 lakh per Mw would be enforced, except in the event of the project not being viable, before signing of the MoU.

There is also provision of forfeitures of security deposits due to non-implementation at the rate of 1 percent of the project cost, after signing the MoU. Besides, there is provision of forfeiture of security deposit at the rate of 1 percent of the project cost and upfront payments if any, after signing the implementation agreement, if the project is unable to make headway.