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India is planning to offer new hydropower projects with all approvals and land-use rights in a bid to mitigate risks and attract investors. The plan is similar to the Ultra Mega Power Projects or UMPP model that are in vogue for thermal power projects.

India is trying to make hydropower projects attractive as part of its commitment at the latest Paris climate conference to cut carbon emissions by 30-35% by 2030.

“We are looking at the possibility of UMPP-style hydropower projects that investors will find attractive," power secretary P.K. Pujari said.

The government believes that it is essential to have a model that addresses the risks involved in large, capital intensive and resource-uncertain hydropower projects. At present, these account for only 15% of the country’s 284 gigawatt (GW) capacity, compared to fossil fuel-based capacity accounting for 70%.

Though the government attempt to set up 4,000 MW capacity UMPPs in thermal power has yielded mixed results, experts see merit in the model.

While Reliance Power’s Sasan project in Madhya Pradesh and Tata Power’s Mundra project in Gujarat are operational, Reliance’s Krishnapatnam project in Andhra Pradesh and Tata’s Tilaiya project in Jharkhand are stuck due to issues relating to coal availability and land acquisition, respectively.

Kameswara Rao, Partner-Grid at consultancy firm PricewaterhouseCoopers, said the UMPP model was successful in delivering large, efficient projects at very competitive pricing.

“The failures happened where pre-development efforts were cut to hasten the process, or where stakeholders could not collectively respond to unexpected events," said Rao.

Delays by states in finalizing project sites and land acquisition, and changes in international norms for coal import have also affected UMPP projects in Tamil Nadu, Karnataka and Gujarat.

To regain investor interest, the government has modified the bidding document to set up the proposed UMPPs (thermal) at Bedabahal in Odisha and Cheyyur in Tamil Nadu, which were earlier cancelled due to lukewarm industry response.

These 27,000-crore, 40,000 MW projects would be auctioned soon.

For large, capital-intensive hydropower projects too, the risks are high.

“The government’s best approach here is to undertake pre-development efforts, such as in hydrology studies, laying access roads and building transmission, and securing power sale agreements. The governments would incur these costs anyway, but by taking this first step diligently, the project will gain hugely in valuation when auctioned to the private sector. It’s a perfect win-win model," said Rao.

The government is banking heavily on private investments for augmenting power capacity, modernizing the power distribution and metering system and to set up green energy corridors.

Pujari, in a presentation made at the India Investment Summit 2016 organized by the finance ministry last week, said the country would get 9.3 trillion of investments over the next couple of years when the ongoing power projects along with some new ones are ready.

These include an addition of 89,400 MW of thermal power capacity, 18,000 MW of nuclear power facility, 10,000 MW of supercritical technology aimed at reducing carbon emissions, renovation of 12,750 MW thermal power capacity and six ultra-mega power projects—large thermal power plants—of about 4,000 MW each.

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