Hydro power generation: High tariff, green clearances trouble sector

At least 18 hydro projects of 6.2 GW capacity are currently “stalled midway. (Illustration: C R Sasikumar)

Huge time and cost overruns, high upfront cost to establish projects, long-drawn process to get green clearances, additional cess imposed by various state governments on projects, high tariff and reluctance of states to sign power purchase agreements (PPAs) are the some of the difficulties that are currently impeding the hydroelectric power development in the country, according to the Union power ministry.

The difficulties were listed by Archana Agrawal, joint secretary in the Ministry of Power, while giving a presentation on September 6 to R K Singh, who took charge as Minister of State (Independent Charge) for Power and Renewable Energy on September 5. According to the presentation, 18 hydro projects of 6.2 GW capacity are currently “stalled midway”. Currently, while 592 hydro projects of total 145.3 GW capacity have been allotted across the country, only 30.7 per cent of the projects have been completed as yet, according to the power ministry.

The first issue was about “huge time and cost overruns”. By giving the examples of four different hydro projects — Teesta L/D/ III, Nathpa Jhakri, Tehri and Koldam — the presentation stated: “Hydropower projects are getting completed at two or more times the sanctioned cost. (Moreover), hydropower projects are getting completed at double the sanctioned time.” According to the minutes of this meeting, Singh “desired framing of timelines for commissioning of all underconstruction projects”. Singh added that “these timelines should be justified and should be in bi-monthly blocks starting October 1, 2017”.

Another issue, according to the presentation, hampering the development of hydro projects is “high upfront cost”. The revised costs to establish the projects such as Kishanganga, Rangit IV, Teesta VI and Kameng are Rs 5,498 crore, Rs 1,600 crore, Rs 5,400 crore and Rs 6,085 crore, respectively. For these four projects, revised costs are higher by 51 per cent, 120.3 per cent, 64.4 per cent and 143.6 per cent, respectively. This high upfront cost is also leading to high tariff, which is another difficulty that the hydro sector is facing.

According to the presentation, state distribution companies (discoms) are extremely “reluctant to purchase hydropower” because of its high tariff. The issue was explained by the Ministry of Power to the Parliamentary Standing Committee on Energy last year: “Though we get the finance (loan) for 12 or 15 years, we have to repay the complete loan within 12 to 15 years. The cash flow to repay the loan can be derived from tariff only. So, during the initial years, we have to fix the tariff more … The (upfront) cost is more and that is the reason this problem is coming that the tariff of power project is coming in the range of five to six rupees and the states are not ready to purchase this.” The Standing Committee tabled its hydro sector report in Parliament on May 5, 2016.

On August 12, 2014, Prime Minister Narendra Modi inaugurated two hydro projects in Jammu and Kashmir — a 44-MW Chutak hydroelectric project in Kargil district and a 45-MW Nimoo Bazgo project in Leh district. At the time of its launch, the Central government stated that these two projects would be selling electricity at the tariff of Rs 6.33 per unit and Rs 6.26 per unit, respectively. According to the presentation, the current tariffs at these two projects are Rs 8.76 per unit and Rs 6.83 per unit, respectively. The presentation stated that “cheaper power is available in power exchange” for state discoms.

Another major issue raised in the presentation is the “long-drawn process” that hydro projects have to go through in order to get green clearances. On this issue, the ministry told the Standing Committee last year: “We have analysed the reason as to why hydro power is not coming up at a desired stage. The reasons which we have understood so far are various clearances. When I say various clearances, clearances mean environmental and forest clearances and then there are some land acquisition issues; there are rehabilitation and resettlement issues; and there are legal and social problems also. In the last 10 to 15 years, there has been tremendous social resistance to the large hydro projects.”

Land acquisition and other local issues were also raised at the September 6 meeting. According to the presentation, Kashang-III hydro project of 65 MW capacity is stalled in Himachal Pradesh since 2011 due to “agitation by locals” and “subjudice matter”. It also stated that Ratle hydro project of 850 MW capacity is stalled in Jammu and Kashmir since July 2014 due to “local disturbance and Indus Water Treaty issues”. Vishnugad Pipalkoti hydro project, which is situated in Uttarakhand and is of 444 MW capacity, has been hampered due to issues related to forest clearance and “local disruption”, according to the power ministry.

Inter-state issues are also troubling hydro power projects.

Development of four hydro projects — Shivasamudram, Mekadatu, Hogenekkal and Rasimanal — have been “affected” due to Cauvery water dispute between Tamil Nadu and Karnataka. These four projects are of 345 MW, 400 MW, 120 MW and 480 MW capacity, respectively. On September 6, Singh was also made aware about the NHPC Limited’s Subansiri Lower Project, which is of 2000 MW capacity and is stuck since December 2011 due to protests in Assam as well as Arunachal Pradesh. According to the presentation, Rs 8,000 crore have been spent on Subansiri Lower project as yet. It also states that “stalling of this project has hit investor confidence” and “the fate of this project is keenly watched by other developers”. The National Green Tribunal has put a stay on Subansiri Lower Project.

Additional cess imposed by various state governments on hydro projects has created an “additional burden”, according to the September 6 presentation. The presentation states that Uttarakhand and Sikkim charges “Green Cess” and “Environment Cess”, respectively. Similarly, Jammu and Kashmir as well as Uttarakhand charge “Water Cess”, which is adding to project cost. According to the minutes of the meeting, Singh “desired that these issues” of “additional cess levied” by various state governments “should be taken up expeditiously with the (respective) state government at higher level due to non consumptive use of water and to ensure non-escalation of tariff”.