Govt allocates Rs 12,460 cr towards creating ‘enabling infra’ for hydropower projects

New Delhi: The government has allocated a corpus of Rs 12,461 crore towards creating “enabling infrastructure” for upcoming hydropower projects and Pumped Storage Projects (PSPs), said an order issued by the Ministry of Power. The scheme will be implemented starting this financial year (FY2024-25) until FY2031-32. The government plans to support 31 GW of hydropower capacity and 15 GW of PSPs under this scheme, said the order dated October 8.

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The Cabinet had approved measures in March 2019 to promote the hydropower sector, including budgetary support for the cost of enabling infrastructure. However, the scheme only included the construction of roads and bridges as ‘enabling infrastructure’ for hydropower projects. “To accelerate the pace of hydropower development, the Cabinet in its meeting held on September 11^th, 2024 has approved the following modifications to the earlier approved scheme for budgetary support for the cost of enabling infrastructure,” said the order.

How much budgetary support can be availed by hydropower projects, PSPs?

Under the scheme, the budgetary support for enabling infrastructure has been capped at Rs 1 crore/MW for projects upto 200 MW, and Rs 200 crore plus Rs 0.75 crore/MW for projects above 200 MW, said the order. “In exceptional cases, when the situation so warrants, the budgetary support may be increased to Rs 1.5 crore per MW, provided there is sufficient justification based on objective criteria specified by the Ministry of Power in consultation with the Ministry of Finance,” said the order.

Who can avail budgetary support for ‘enabling infrastructure’?

The budgetary support will be provided to individual projects after appraisal of the cost of enabling infrastructure by the Delegated Investment Board (DIB) or Public Investment Board (PIB), as applicable, and as per approval of the competent authority, said the Power Ministry. The financial support can be availed by both private and public sector entities, all hydropower projects of capacity more than 25 MW and all PSPs, including those built for captive consumption. However, only those private projects will be eligible for receiving financial support which have been allotted on a transparent basis. “Projects for which the Letter of Award for the first major package is issued upto 30.06.2028 will be eligible under this scheme,” said the Power Ministry.

‘Enabling infrastructure’ for hydropower projects

The set of measures approved by the Cabinet in 2019 only considered roads and bridges as ‘enabling infrastructure’ for hydropower projects. After the Cabinet approved the fresh set of modifications to the scheme, the ambit of budgetary support has been widened to include transmission line from power house to the nearest pooling point, including upgradation of pooling substations of state or Central Transmission Utility, ropeways, railway sidings and communication infrastructure. “The strengthening of existing roads/bridges leading to the project will also be eligible for central assistance under this scheme,” the ministry said.

India is planning to increase its hydropower capacity from 42 GW at present to 67 GW by 2031-32, marking an increase of more than half of present capacity or 25 GW. On the other hand, PSPs with aggregate capacity of 2.7 GW are under construction in the county and another 50 GW is under various stages of development. It is projected that PSP capacity shall increase from 4.7 GW to around 55 GW by 2031-32.

Power generated by hydropower projects is costlier in comparison to other alternatives at least in the initial years of commissioning. One of the reasons for the high tariff of hydropower is the cost of enabling infrastructure in the project cost since most of the hydropower potential is located in the higher reaches of Himalayas and the North-East Region, which are difficult terrains. DISCOMs (power distribution companies) are reluctant to sign Power Purchase Agreements (PPAs) for hydropower in the initial years of commissioning due to the high tariff. Therefore, to reduce the cost of hydropower and make it viable, the government has offered budgetary support to individual projects.

The move will benefit companies like NTPC, NHPC, SJVN, Chenab Valley Power Projects (CVPP), THDC, NEEPCO, APGENCO, HPPCL, KSEB, APGCL, BVPCL, JKSPDC, PSPCL, UJVNL in the public sector, and Statkraft, JSW, Greenko etc in the private sector.

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