Modi Government may soon take up hydel policy; Rs 16,000-crore relief for stuck projects

The Modi Government is likely to take up the much-awaited new hydro electric power policy this month with a Rs 16,000-crore relief package for the delayed projects likely to be part of it, a senior official familiar with the development told Moneycontrol. An interest subvention of as much as 4 percent is likely to be part of the policy, the official said. A decision on the hydel policy has been speculated upon for at least 6 months now.

“The interest subvention will be provided to the delayed projects through the National Clean Energy Fund and it will be linked to the construction,” he said.

He said the projects had been divided into two categories – ones which were likely to be commissioned by 2022 and another set comprising projects with a commissioning date of any time up to 2027. The total installed capacity across the two categories would come to 16,000 MW.

The official said the policy would also have a “funding mechanism for flood moderation”.

“Reinforcements in a dam to avoid the risk of floods raises the cost of construction. There are components in construction cost of a hydro electric dam which the regulator does not allow the developer to recover through tariff due to obvious reason of not making the power costly for the end user. This hurts the developers. The new policy will aim to protect the interest of the developers as well as the consumers,” he said.

The new policy will also consider all hydro electric capacities as renewable. So far, hydel projects of up to 25 MW were considered under renewable category and thus only such units attracted tax and other benefits. Hydel projects of over 25 MW were considered as conventional units and thus failed to get many of the benefits that units of up to 25 MW managed to get.

Under the new policy, all hydel projects will be treated at par and thus get the same benefits that currently only go to units of up to 25 MW. Another significant clause that the new policy could have is a hydro purchase obligation or HPO — on the lines of renewable purchase obligation or RPO.

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As per the law, utilities are required to buy a certain part of their total power demand from plants running on renewable energy sources. Each state — power being a state subject — has its own minimum threshold that it imposes on utilities for adhering to RPO including a separate RPO for solar.