Cabinet approves new policy

The Union Cabinet on Thursday approved a new hydroelectric policy aimed at boosting the sector, including according large hydro projects the status of renewable energy projects.

According to the new policy, large hydro projects will also be designated as renewable energy projects. So far, only smaller projects of less than 25 MW in capacity were categorised as renewable energy.

With the removal of this distinction, large hydro projects will be included as a separate category under the non-solar renewable purchase obligation policy. Under this policy, power purchasers will have to source a portion of electricity from large hydro projects.

“The hydro policy was in the works for a long time,” Power and Renewable Energy Minister R.K. Singh said at a press conference. “It will be a seminal departure in so far as our hydro sector is concerned. The hydro sector has natural problems that most of the projects are in areas that are undeveloped. They are difficult areas, with geological surprises, which results in higher costs and time delays.”

“All this led to a higher per megawatt cost and so the hydro sector was not competitive,” Mr. Singh added. “The policy has taken measures to make it competitive.”

He also said the new policy had increased the debt repayment period for hydro projects to 18 years from the current 12 years with the provision to introduce an escalating tariff of 2%.

“One of the reasons for the higher costs used to be that the tenure of the loan was 12 years,” Mr. Singh said. “What used to happen was that the cost was higher during the tenure and then would fall drastically after that. We have spoken to the banks and in the policy we have said that the tenure of the loan will be extended to 18 years.”

“The tariff to be fixed will be fixed keeping in the mind the tenure of the project on an escalating basis, so that it is affordable throughout the tenure,” he added.

Apart from that, the policy also provides for additional funds separately for infrastructure development as well as separate funds for the costs of flood moderation.

The budgetary support for infrastructure creation will be limited to ₹1.5 crore per MW for projects up to 200 MW and ₹1 crore per MW for those above 200 MW.

According to the government, India has a hydro-power potential of 1,45,320 MW, of which only about 45,400 MW has been utilised so far. Only about 10,000 MW of hydro-power has been added in the last 10 years. The share of hydro-power in the total generation capacity has declined from 50.36% in the 1960s to around 13% in 2018-19, the government said in a release.