Hydropower Generation | Malana project is a story of many firsts

Hydropower Generation | Malana project is a story of many firsts
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First Published: Sun, Aug 09 2009. 10 13 PM IST

Business model: The Malana hydroelectric plant in Himachal Pradesh is India’s first merchant power project—it can sell power in the open market. Abel Robinson / Mint
Business model: The Malana hydroelectric plant in Himachal Pradesh is India’s first merchant power project—it can sell power in the open market. Abel Robinson / Mint
Updated: Sun, Aug 09 2009. 10 13 PM IST
New Delhi: The 86MW Malana hydroelectric power project in Himachal Pradesh is unique in many ways. The project, developed by Bhilwara Energy Ltd, is situated on the Malana nallah—a tributary of the Parbati river in Kullu district—and has many firsts to its credit.
It is the first merchant power project (MPP) in India and also the first to have interstate transmission of electricity. It also has the distinction of being the first independent power producer in the Indian hydropower sector. MPPs generate electricity to sell in the open market.
Business model: The Malana hydroelectric plant in Himachal Pradesh is India’s first merchant power project—it can sell power in the open market. Abel Robinson / Mint
While hydropower projects require a much higher capital cost of Rs7 crore per MW, the project has been set up at a competitive capital cost of Rs3.75 crore per MW.
Malana was awarded to Bhilwara Energy by the Himachal Pradesh government when the power sector was opened up to private investment in 1993. Nine such projects were awarded by the state government.
Where hydropower projects across India are getting stalled by issues such as delays in investment decisions, contractual problems, resistance to land acquisition, geological issues and natural calamities, the Malana project was built within 30 months. Construction started in January 1999, financial closure was achieved in March 2000 and the project was commissioned on 5 July 2001.
“The project was executed very fast. The promoters also financed it largely from their own funds. They have immensely benefited from the project. This demonstrated that whoever puts (up) the project first will benefit more than others,” said Tantra Narayan Thakur, chairman and managing director, PTC India Ltd, India’s largest power trading company.
At the time the Malana project was commissioned, there was no electricity Act, rules on private sector participation in hydroelectric projects were fuzzy and power producers were denied open access, which would have allowed them to sell their output to consumers anywhere in the country.
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“They overcame these challenges one by one. Even the resettlement and rehabilitation in the region has been managed very well,” said Shubhranshu Patnaik, an executive director at consultancy firm PricewaterhouseCoopers.
The project, with a debt to equity ratio of 70:30, was built for a life span of 40 years, and will provide 15% of the power generated free to the state for the first 12 years, with the state’s share increasing to 20% thereafter. The balance power is sold to the north Indian states through PTC India at a tariff of around Rs6 per unit.
“Hydroelectric projects are normally located in high altitudes and difficult mountainous terrain which are in remote areas and by nature itself have lack of infrastructure. Therefore, (the) gestation period of construction of hydroelectric project is relatively longer than any other projects,” said Ravi Jhunjhunwala, chairman, LNJ Bhilwara group.
Bhilwara Energy has a project portfolio of 10 that would together have an installed capacity of 2,483MW. Of this, 192MW is nearing completion and 2,205MW is in the pre-construction stage.
Several hydropower projects in the country have been delayed, and India has met a little less than half the target of 14,393MW set for hydropower generation in the five years to 2007. With the share of hydropower falling from 40% to 25% in the past 20 years, the government is worried. The sector accounts for only 36,916.76MW of the country’s estimated 150,000MW power generating capacity.
India is seeking to add 78,577MW of generating capacity in the next five years, and 16,553MW of that is expected to come from hydropower.
utpal.b@livemint.com
Graphics by Ahmed Raza Khan / Mint
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First Published: Sun, Aug 09 2009. 10 13 PM IST