Home / Industry / Energy /  State electricity boards reluctant to buy power from NHPC projects

In what may impact India’s hydropower generation plans, states are averse to buying electricity from NHPC Ltd’s projects because of high tariffs. State electricity boards (SEBs) are not signing the power purchase agreements (PPAs) for the full life cycle of a project, further exacerbating the situation for the state-owned utility.

The primary reason behind high tariff is time and cost overrun because of issues such as disputes between states, geological issues and resistance from the local population.

In the case of the 330 MW Kishanganga project in Jammu and Kashmir, Rajasthan, Uttar Pradesh and Himachal Pradesh are unwilling to buy electricity from the same.

A senior NHPC executive who spoke on condition of anonymity confirmed this.

Another NHPC executive who asked not to be identified admitted that tarrifs from hydropower projects being commissioned now will be higher than current tariffs.

There have been concerns expressed in some quarters about faltering hydropower generation and its impact on India’s energy security plans.

In the case of some commissioned projects, PPAs have been signed for five years as compared to a desired 35-year period. Many SEBs are unwilling to extend even those PPAs which have been signed for five years and have lapsed.

PPAs totalling 1,337 MW, enough to supply electricity to a state such as Jammu and Kashmir from projects such as Uri-II (240 MW), Parbati-III (520 MW), Teesta Low Dam-III (66 MW), Sewa-II (120 MW), Chamera-III (231 MW) and Teesta Low Dam-IV (160 MW) have only been signed for five years. Even in the case of those PPAs which have signed for five years and have lapsed, the electricity distribution companies are unwillingly to extend them due to high cost; BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL) refused to do so in the case of the Sewa-II project.

India has a power generation capacity of 276,089 megawatts (MW), of which 15% or 41,997.42 MW is hydropower.

Hydropower is the ideal solution for meeting peak demand, as it is relatively easier to switch on and off, compared with thermal sources.

Analysts believe hydropower has an important role in India’s energy mix.

“Hydro projects can support and stabilise the sector as India aggressively chases solar and wind projects. NHPC is uniquely positioned to support this endeavour. With the appropriate mix of old and ongoing projects, NHPC is able to get financing at a corporate level rather than project specific. Its only focus should be towards reducing its project development cycle and bringing onstream projects pending for long," said Sambitosh Mohapatra, who oversees the power and utilities practice at consulting firm PricewaterhouseCoopers.

He explained that the delays are the bigger problem and dismissed the trouble with getting customers to sign long-term PPAs as a hiccup. “Hydro projects typically operate for 35-40 year period and substantial tariff reduction comes in post 10-12 years of its operating life." 

While queries emailed to the spokespeople of NHPC and power ministry remained unanswered till press time, a BSES spokesperson said in an emailed response that it has “sought advice from the DERC (Delhi Electricity Regulatory Commission" on the issue.

Executing a hydropower project is time-consuming and tedious. It includes a thorough survey and investigation, detailed project report preparation, relocation and resettlement of the affected population and infrastructure development.

While work at the Uri-II project in Jammu & Kashmir was stalled due to the agitation against the hanging of Afzal Guru, who was convicted for his role in the terrorist attack on Parliament in 2001, work on the 330 MW Kishanganga project’s dam site was halted as Pakistan had questioned the “legality of the construction and operation of an Indian hydro-electric project" under the Indus Waters Treaty of 1960. The International Court of Arbitration at The Hague ruled in India’s favour.

Mint reported on 6 May about a majority of state-owned NHPC Ltd’s under construction projects been delayed, hampering the government’s bid to increase power generation in order to meet demand and boost economic growth. These SEBs are increasingly showing reluctance to buy power on account of poor financial health. SEBs, which control the discoms in their respective states, owe nearly 4 trillion in debt to the banking system.

Of this, a majority of the debt is held by utilities in eight states, namely, Rajasthan, Uttar Pradesh, Haryana, Tamil Nadu, Andhra Pradesh, Jharkhand, Bihar and Telangana.

The push for hydropower is also aimed at expanding the electricity user base in the country. India’s per capita power sector consumption, around 1,010 kilowatt hour (kWh), is among the lowest in the world. Around 280 million in the country do not have access to electricity.

In comparison, China has a per capita consumption of 4,000kWh, with developed nations averaging around 15,000kWh per capita.

The Bharatiya Janata Party, which leads the government, had made energy security a part of its poll plank. The Narendra Modi-led government’s energy security plans include harnessing renewable sources such as solar energy, biomass and wind power along with coal, gas, hydropower and nuclear power to bring about an “energy revolution" in the country.

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