The government has announced several incentives to initiate development of hydroelectric power projects in the country in an effort to reduce dependence on thermal power. And because some companies that win these projects do not go ahead with their development, it has instituted penalties against preemptive bidding.
“Getting projects and holding on to them for future commercial transactions will be a thing of the past,” said Union power secretary Anil Razdan.
The previously undisclosed details of the new hydropower policy, cleared by the cabinet on 3 January, show that the government will increase the compensation given to those displaced by a project and, for the first time, allow 40% of the power generated to be sold “to anybody at any price.”
Power plan: A view of the Tehri hydro project. India is seeking to add 78,577MW of generating capacity in the next five years, of which 16,553MW is expected to come from hydro projects. (Photo: Rajeev Dabral/ Mint)
Several hydro projects have been delayed and India has met a little less than half the target of 14,393MW set for hydropower generation in the 10th Plan (2002-07). In April, a study by the parliamentary standing committee on energy showed that the increase in project costs due to delays varied from 400% at the lowest to a maximum of 2,500%.
“There are a lot of problems with the hydro projects. It does not get easier as they are a state subject. Relocation and resettlement is a big problem and should be taken care of. These projects also face huge time and cost overruns,” said Kirit Parikh, member, energy, Planning Commission.
Of the country’s 135,000MW of power generation capacity, only 32,000MW is based on hydropower. India is seeking to add 78,577MW of generating capacity in the next five years, 16,553MW of it expected to come from hydro projects.
The new policy states that developers will provide the money equivalent of 1% of power generated from the project to a fund managed by the district authorities for the development of the area affected by the project. A matching grant would be given by the state government from the 12% free power given to it by the developer. Locals affected by the project will have a say in the use of the fund.
“We have worked along with the states on this and the formulation of the policy has seen active participation from the states,” said Union power minister Sushil Kumar Shinde.
The new policy also mandates that 100 units of free electricity per month be given to families affected by the project for 10 years. The families will be free to consume this power or sell it.
The policy has also introduced penalties for delays. If the developer is not able to complete the project within four years of its financial closure, the quantum of power available for sale as merchant power will be reduced from 40% to 35%.
This is a significant disincentive: 60% of the power generated from such projects is sold through a power purchase agreement where the price per unit is capped; the rest, merchant power, can be sold to anyone and at any price.
A further delay of six months will reduce the merchant power available to 30%, and so on; a delay of an additional four years means the developer has no merchant power left to sell.
While the average time taken to develop a new hydroelectric project is around five years, many have been delayed because of reasons as varied as late investment decisions, contractual problems, land acquisition problems, geological issues and natural calamities.
The new policy also asks for the project developers to implement the United Progressive Alliance government’s ambitious rural electrification programme, the Rajiv Gandhi Grameen Vidyutikaran Yojana, in the vicinity of the project.
Under the scheme, the Centre puts up 90% of the electrification costs, while states contribute the balance. In instances linked to new hydel projects, the state’s share will now be borne by the developer. “No state government has been using (the) 12% free power (it gets from the project) for the development of the displaced people. I am appalled by this gesture,” Shinde added.
“It is unfortunate that it has taken so long for the approval of the policy as the draft was ready in October 2006. Not 1% revenue is being utilized by the state governments for the project-affected people. If it is not done then the local people’s resistance towards the project will always be there,” said R.V. Shahi, a former Union power secretary.