The government’s proposed hydropower policy, in the works for more than four years, is set to undergo a major revision, sources said. In a major departure from the policy planned earlier, the draft of the new Cabinet note proposes to not give the host state any free power for the first five years. The state where the hydroelectric plant was located so far enjoyed free power equivalent to 12 percent of the plant’s capacity.
“Under the new policy, 10 percent of the plant’s capacity will be given free to the state from the 10th year of its operation,” an official familiar with the development told Moneycontrol.
He said the host state will receive 2 percent free power from the sixth year and this would incrementally rise by 2 percentage points every year to reach 10 percent in the 10th year.
“Not giving free power for the first five years will increase viability of the project, attracting private investment in the process,” the official said.
Against the free power that the host state gets from the project developer, it gives a matching grant towards the local area development fund to help the locals displaced and affected by the plant. Locals affected by the project have a say in the use of the fund.
The new policy will immediately cover 30,000 MW of proposed hydroelectric policy, the official said. Of this, 14,000 MW is expected to come up by 2022 and 16,000 MW by 2030. The new policy will not impact any existing capacity, the official said.
The changes don’t end here. To encourage private investment further, the government has agreed to provide Budgetary support to create infrastructure — like roads and bridges — necessary for establishing the plant.
Power regulator — the Central Electricity Regulatory Commission — does not allow inclusion of cost incurred on building roads and bridges in pricing of power, thus making it unattractive for private developers to venture into such projects.
The new policy will also extend the tenures of loans granted for hydel capacities to 25 years from 15 at present.
India’s hydropower potential stands around 145,000 MW and at 60 percent load factor, it can meet the demand of around 85,000 MW. Around 26 percent of the country’s hydropower potential has been exploited.