Hydel project tariffs to come down

Hydel projects like Karcham Wangtoo, Koteshwar and Kemang are expected to see tariffs fall by about 20-25 paise per unit with Power Finance Corporation(PFC) increasing the loan repayment period for such projects from 15 years to 20.

"The repayment period for transmission projects has also been increased from the existing 12 years to 15 after the usual moratorium period," said a PFC executive.

"We are progressively moving in the direction of increasing the repayment period to the entire codal life of plants," he added. The codal life is the period over which a product can be depreciated. Companies, however, usually undertake advance depreciation to avail of tax benefits.

For instance, combined cycle plants have a life of 15 years, coal-fired plants have a 25-year life, transmission projects have a 35-year life and hydel projects have a depreciation life of 50 years.

So, over a period of time, PFC proposes to increase the repayment period for various projects in line with their depreciation period.

PFC executive said increased tenure of repayment period to 20 years in case of hydel projects would increase the loan tenure effectively to 24-26 years, which could reduce the tariff for hydel projects financed by the corporation by about 20-25 paise per kWh. Projects with a greater loan component are expected to benefit more from this move.

Among the major hydel projects funded by the PFC are the Jaypee groups Karcham Wangtoo, a 1000 MW project in Himachal Pradesh, Tehri Hydro Development Corporation's Koteshwar 400 MW project in Uttar Pradesh and North Eastern Electric Power Corporation's 600 MW Kemang project in Arunachal Pradesh.

In case of transmission projects, the decision to increase the repayment period was taken in response to a proposal by NEEPCO, which is developing an associated transmission project along with Kemang. The benefit will also be available to other transmission projects, said PFC executives.