Govt plans push for hydro power

After setting the power distribution segment on a reform road, the Union government is planning to rescue the languishing hydro power sector, with a three-pronged approach.

The first move would be to increase the ambit of small hydro projects to 100 Mw from current 25 Mw. This would help achieve the renewable energy (RE) targets of states and also bring a large number of projects under the net of government subsidy and other tax benefits.

The installed capacity of hydro power projects has remained 40,000 Mw for the past three years, while that of the renewable energy sector has increased about 20 per cent in the same period. In the past decade, RE (solar and wind power) has grown by 89 per cent, while hydro has staggered at 28 per cent.

During the preceding United Progressive Alliance government, hydro power projects were given a boost, with large allocations to the private sector.

Arunachal Pradesh had awarded about 60,000 Mw of hydro projects to 130 companies. But, legal and regulatory issues playing spoilsport, none of the projects were commissioned.

Since coming to power, the National Democratic Alliance has given a renewed push to RE, especially solar power. Now, hydro projects will also get a push.

Senior officials said discussions are on to increase the capacity of small hydro projects to 100 Mw. Also, a considerable amount of hydro capacity would be planned in states that share borders with Nepal and Bhutan.

"This would also make available the tax benefits and subsidies that small hydro enjoys to larger projects. This is done in hope of reviving private investment in the sector and also gives opportunity to small players to expand capacity at the same location," said a senior official at the Ministry of New and Renewable Energy.

At present, subsidies of Rs 1.5 crore to Rs 20 crore per Mw are given to small hydro projects. Renewable energy also enjoys accelerated tax benefit. "Above all, renewable energy is focus area of this government. Sale of power is easier if hydro is defined as renewable power," said the official.

Close to 4,000 Mw of projects have installed capacity of 25 Mw, while around 6,000 Mw is in range of 25-100 Mw.

The power ministry is, on the other hand, mulling to involve a central procurement agency to buy hydro power from existing and upcoming plants. NTPC Vidyut Vyapar Nigam (NVVN), the power trading arm of thermal power giant NTPC, could be a probable agency. NVVN is best known for pulling off the first phase of the National Solar Mission in 2010 by procuring and bundling solar power. "The idea is to replicate the same model with small hydro. Hydel faces procurement issues. With a central agency, there is surety of off-take and payment," said a senior NTPC official, confirming the discussions.

The focus is on hydro-rich states - Uttrakhand, Arunanchal Pradesh and Sikkim.

Hydropower's share in the installed power capacity has declined to 15.5 per cent by the end of February this year, from 26 per cent at the end of March 2005. Share of renewable power has increased to 14.1 per cent of 275,912 Mw of total installed capacity from a mere three per cent in 2005.

Senior power sector experts said as the renewable energy capacity is being ramped up at such a large scale, hydro is the need of the hour. "Run-of-the river projects, which can kick start power generation and act as balancing power to renewable energy, are necessary more than ever. What is to be seen is how the government manages the power transmission," said a source.