In order to achieve hydropower generation capacity target, the Centre needs to work in collaboration with other Ministries, departments and State Governments, consultancy firm PwC has said.
According to a PwC report titled 'Hydropower in India - Key enablers for a better tomorrow', the sector is facing several challenges, including financing, inadequate enabling infrastructure and regulatory hurdles.
"Ministries, departments and State Governments need to work together collaboratively and efficiently, in a co-ordinated way, to achieve policy goals and capacity addition targets. Alignment of processes, structures and institutional framework is necessary to achieve this," it said.
The report said a large number of hydropower projects with common river systems between adjoining states are held up due to a lack of inter-state agreements and disputes on water- sharing.
"Government needs to ensure that inter-state agreements for water-sharing must be in place to avoid disputes. A National River Authority of India may be constituted to improve river management, address inter-state disputes and for integrated river basin development," it said.
To achieve the target, the Central government also needs to consider making it mandatory for power distribution utilities to purchase a fixed amount of hydropower, PwC said.
"Such hydropower purchase obligations provide assurance to developers by guaranteeing the purchase of electricity and make projects much more bankable."
Favourable tax treatment, especially at the early stage of projects, will reduce project cost and help secure cheaper financing, the consultant said.
The report suggested that capital markets need to be deepened to help provide long-term debt financing for the capital-intensive nature and high gestation periods of hydropower projects.
"Initiatives such as India Infrastructure Finance Company have been taken. The Government needs to encourage suitable innovative products like tax-exempt bonds focussed on the hydropower sector.
"Multi-lateral institutions and green funds have in recent times shown some appetite to fund both public and private sector hydropower investments and can be a good source for investors if a sound business case and risk mitigation mechanism can be demonstrated," the report said.
