Hydel Psus Allowed To Form Joint Ventures

The power ministry has allowed public sector units (PSUs) to enter into joint ventures for hydel projects.

It has decided to accord automatic clearance for projects, in which PSUs have a minimum stake of 51 per cent.

Government approval will be required for projects in which a public sector unit holds less than 50 per cent equity.

Based on the recommendations of M K Sambhamurti Committee on hydro power, the public sector will have to select its private partner through competitive bidding.

The power ministry maintains that joint ventures would be best suited for hydel projects with a capacity of more than 500 mw.

 

The Sambhamurti committee report has, however, pointed out to problems related to distribution of dividends in joint ventures between foreign and local entities.

The Companies Act provides for the same rate of dividend to all share holders, irrespective of whether they are local or foreign.

This, according to the committee, would conflict with the tariff notification norms, which allow adjustment of dividend to foreign equity share holders to reflect the devaluation of the rupee.

The governments decision to permit joint ventures is expected to give a major boost to the hydel sector, which requires big investment.

It has not been able to attract any major investment in the sector so far.

Several public sector units have already lined up for joint ventures. Among them are National Hydro Power Corporation (NHPC), North Eastern Electric Power Corporation (Neepco), Nathpa Jhakri Power Corporation, Tehri Hydro Development Corporation and Bharat Heavy Electricals Ltd (BHEL).

It is felt that joint ventures would prove to be more efficient than the turnkey and co-financing approach adopted earlier in executing hydel projects.

A case in point is National Hydro Power Corporations Uri and Dulahasti projects.

The two projects ran into heavy time and cost overruns owing to the complex tendering and evaluation of bids. Besides, exchange rate variations led to escalation of project costs.

The ministry said joint ventures would ease the financial burden on public sector undertakings while setting up hydel projects, as the costs would now be shared between the government run organisations and private sector.

Arunachal scouting for partners

Kandula Subramaniam NEW DELHI

Arunachal Pradesh, which had earlier opposed to set up two large hydel projects, has now decided to undertake the same under a joint sector company with the association of the state government and a Central sector utility.

The two mega-projects which the state government had opposed are Dihang (1340 mw) and Subansiri (7800 mw). The state government is also scouting for a third partner for the joint venture as the investments called for the projects are substantial. The state is also considering a similar venture for two other projects, Kameng (600 mw) and Tipaimukh (1500 mw).

The North East along with Himachal Pradesh and Jammu & Kashmir have the bulk of the hydel potential. The financial health of the states mentioned above and the resources that are required for hydel projects prevent them from setting up large hydel stations. For this reason, the Central Sector had been forced to take up the large hydel projects.