Government Mulls Cheaper Loans To Revive Stalled Small Hydropower Projects
The government is working on a policy to revive stalled small hydroelectric projects across the country by extending cheaper loans to developers as part of its push to boost clean energy, two senior officials in the Ministry of New and Renewable Energy said. Efforts are on to revive stuck projects through state-run Indian Renewable Energy Development Agency, the first official told BloombergQuint requesting anonymity. IREDA will help the developers of stranded small hydropower projects by giving concessional loans at an interest rate up to 2 percent, the official said. A hydel project with a capacity up to 25 megawatts is classified as ‘small’ and India has 1,075 such plants with a total installed capacity of about 4,325 MW, according to the annual report of the renewable energy ministry. Over 230 projects are in various stages of implementation. There is no data available on how many are stalled.
Among the factors that hold up work on these units are financial stress, poor availability of technical data on flow of water, environmental concerns or court cases, particularly in northern states after the 2013 Uttarakhand floods, and red tape, said Vinay Rastogi, managing director of consulting firm Bridge to India Energy Pvt. Ltd. “The projects have many benefits, including lower capital cost, shorter gestation period and lower social risk,” said Rastogi. Considering that small hydropower projects are a state subject, the government’s role will be limited to financial assistance, the second official from the ministry quoted above said requesting anonymity. Since most projects are located in remote areas and tough terrain, developers have to build local infrastructure which can be a drag on their financials, the official said. The cost of setting up a small hydropower plant works out to Rs 7-8 crore per megawatt, which is higher compared to bigger units, said the second official. IREDA is expected to extend loans for up to 70 percent of the outstanding amount that project developers owe to the primary lender, the official said.
Central assistance will help those projects get completed, said Kameswara Rao, partner (energy, utilities and mining), PwC India. This is expected to support the government’s renewable energy capacity target of 175 gigawatts, including 5 GW from small hydro units by 2022. The government estimates a potential of about 20 GW from 6,474 sites that can be developed into small hydroelectric units, according to information on the ministry’s website. “Overall, the potential of small hydro is modest but it helps tap local resources of states more efficiently,” said Rao.
Source:Bloomberg
