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Govt looks at plan to rejig hydropower tariff

29 June, 2016

Concerned over few takers for electricity generated from hydropower projects, the National Democratic Alliance (NDA) government is working on a strategy to make its tariff competitive vis-a-vis other sources such as thermal and renewable.

This involves lowering the equity component in the tariff model during the initial years of a project. By doing so, the cost of electricity may not be as steep as it is today thereby attracting buyers.

“Steps will be taken to make the tariff viable. One of the steps being explored is reducing the front-loading of equity on tariff,” said a senior government official requesting anonymity.

This comes in the backdrop of electricity tariff from state-run NHPC Ltd’s projects such as the 45-megawatt (MW) Nimmo Bazgo and 44MW Chutak in Jammu and Kashmir being as high as Rs9 and Rs6.96 per unit, respectively. The primary reason behind such high tariffs is the inordinate delays in the completion of hydropower projects.

Apart from forest and wildlife concerns, hydropower projects have grappled with rehabilitation and resettlement issues, high capital costs and long gestation period. Also, geological surprises and shortage of trained manpower makes the task difficult. There are other problems such as inaccessibility of area, land acquisition and inter-state conflicts.

Queries emailed to the spokespersons of the power ministry and NHPC on 28 June remained unanswered.

Electricity from most of NHPC’s delayed projects is priced at more than Rs6 per unit. In comparison the average price of electricity from state-run NTPC plants was Rs3.15 per unit in March.

Experts remain sceptical about the measures being adequate to help revive the hydropower sector.

“These steps could be useful for the existing projects that have already been commissioned or where work is under way, but it is a question mark whether this will attract Indian private investors because private sector investors have realised that the sector is highly technical and it involves geological risks which cannot be mitigated in advance,” said Kuljit Singh, partner at consultancy firm EY.

“Indian investors can be attracted only after there are great successes stories in the sector lead by big foreign investors,” he added.

InfraCircle reported on 14 June about seven of NHPC’s projects totalling 5,930MW are facing problems and may get delayed. They were initially planned to be commissioned during the 2017-22 period.

With the NDAs push for clean energy projects such as solar and wind, which are infirm sources of electricity, there is a need for higher share of hydropower in India’s energy mix as a spinning reserve to provide balance to the national grid. Unlike coal-fuelled projects, hydropower projects can start or stop generation quickly. Currently, hydropower’s share in India’s energy mix is around 14% compared with an optimal share of 40%.

India has a total installed capacity of 302,833MW, of which hydropower accounts for 42,783MW.

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Govt looks at plan to rejig hydropower tariff

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