Hydro power in India likely to see boost with 10 Gw units, new policy

Hydro power in India is likely to see a boost with projects of close to 10 Gw to either restart or commence construction. 

Along with this, the Centre is moving a policy for promoting hydro power, which aims at reducing the cost of construction.

The policy is likely to do away with any requirement for creating irrigation facilities, allied assets or any social infrastructure in order to bring down costs. Government officials said hydro power would be promoted and incentivised as peaking power.

“The rampant growth that solar and wind has witnessed entails hydro power capacity addition in tandem for grid stability. Hydro power is the perfect peaking power for India. The sector did face some challenges for some time but it would hereon see massive growth,” said a senior official in the ministry of power.

Peaking power is the power supply that meets the sudden increase in demand or supply shortage. While coal is used as base load, solar and wind power have intermittent supply. India has added more than 20 Gw of solar and 15 Gw of wind in the past five years. 

On the other hand, the installed capacity of hydropower projects has not grown beyond 40 Gw during the same period. 

Officials said the policy, which would soon get the Cabinet’s nod, would not have any financial incentive or fund support. Last year, the Centre had drafted a policy that proposed Rs 160 billion aid to revive projects of close to 11 Gw. 

This included interest subvention and a proposal to create a Hydro Power Development Fund (HPDF). The Union finance ministry, however, asked the power ministry to rework the scheme and reduce the fund amount.

Stagnation in the hydro sector hit the companies as well, with some of them landing in insolvency courts. Lanco Infratech’s Teesta-VI is one such case. It is learnt state-owned NHPC has emerged as the highest bidder for it.

Apart from the policy, the Centre is looking at reviving close to 10 Gw of hydropower projects. 

There are three key projects that recently received National Green Tribunal’s nod to start construction — Dibang (3 Gw), Subansari (2 Gw) and Teesta-IV (520 Mw).

A government official said the Pakaldul project (1 Gw) in Jammu and Kashmir recently received Rs 11 billion as grant and Rs 25 billion as subordinate debt from the Centre to expedite construction. The project is the joint venture of NHPC and the state government. The state government has waived water cess, free power entitlement and some construction taxes for 10 years. Under the current hydro power project construction policy, a host state is entitled to free power for initial years.

“We are also considering two new projects of 1.1 Gw on the Indus river. Financial restructuring is being worked upon to reduce the tariff of these projects,” he said, adding the government is mostly looking at non-Ganges projects.

Uttarakhand, which decided to forgo 4 Gw of hydro projects following ecological issues, and the Supreme Court directive to stop constructing dams, had sought financial support from the Centre. “We had reduced effluent flow by 15 per cent and forgone more than Rs 40 billion of investment in the hydro sector. In turn, we asked the Centre to support ecologically sustainable hydro projects through viability gap funding,” said a senior official with the state government of Uttarakhand.