Hydro policy may link free power with project progress

New Delhi: The Centre is considering a new hydro power policy that may link free power from a project to the host states to the progress of the projects, offer annuity to project-affected families on early completion and devise other measures to lower project costs and tariffs.

The draft proposal circulated among states for discussion seeks to address problems that have discouraged private investment and stagnated the capacity addition, said a government official. Time and cost overruns can raise tariffs from new hydro projects up to ₹8 per unit but with these measures the government believes a ₹4.5 per unit price may be possible.

Hydro power is envisaged to play a vital role in the country meeting Nationally Determined Contribution (NDC) climate commitments.


The proposed policy seeks budgetary support for enabling infrastructure around new hydro projects, and waiver of inter-state transmission fees for 18 years.

"The development of hydro power and pumped storage plants assumes greater importance and significance to ensure peaking and balancing power for the grid as the country targets a renewable capacity of 500 GW," said the official, who did not wish to be identified. "Hydro power thus has a renewed thrust due to energy considerations and grid stability considerations."

India currently has 48 GW hydro capacity, with a potential for total 145 GW generation. The government is targeting 70 GW capacity by 2030.

Hydro projects are usually in remote locations and at times face law and order issues, rehabilitation-resettlement difficulties and geographical surprises, resulting in time and cost overruns. Free power expectations of the host state, upfront premium and water cess also affect their viability.

The objective of the policy is to make hydro power viable and competitive, said the official.