Cabinet approves renewable status for large hydro power projects

The News

  • In a boost to hydro-electric power capacity in the country, the government has approved a number of measures.


In Brief: Hydel power sector in India


  • The hydropower potential of India is around 1,45,000 MW.
  • Out of this, only 26% of this potential has been exploited.




Financial Constraints

  • A large number of hydel-projects are constrained with finances as they are highly capital-intensive.
  • As a result, these projects are stalled.

High Tariffs

  • In comparison to other sources of power, hydro power tariff is higher.
  • As a result, Discoms refrain from buying hydel power.
  • Discoms are obligated to buy renewable energy under non-solar Renewable Purchase Obligation (RPO). However, only small hydel projects of up to 25 MW capacity were considered renewable so far.

Low private investment

  • Currently, in calculating the price of power from hydel projects, cost incurred on building roads and bridges is not taken into account.
  • As a result, it is hindering the private sector from entering the sector.

Free power to host state

  • Currently, states hosting the hydel-projects get free power for first five years up to 12% of the plant capacity.
  • This makes it unviable for private sector to venture into hydel projects.



Measures taken to improve hydel power sector

Renewable energy status

  • Large hydel projects are being granted renewable energy status.

RPOs to Discoms

  • Large hydel projects can now sell renewable energy certificates under non-solar Renewable Purchase Obligation (RPOs) to discoms.

Infrastructure funds

  • Government has approved infrastructure fund for building roads and bridges.
  • Hydel- projects up to 200 MW will be provided Rs 1.5 crore per MW.
  • Hydel- projects above 200 MW will be provided Rs 1 crore per MW.


  • Government will also share the cost of measures adopted by hydel project companies in flood moderation efforts.

Reduction of free power from 12% to 10%

  • The state hosting the hydel projects will now receive only 10% free power from 6th to 10th year of commissioning of the projects.

Other benefits

  • Higher debt-repayment periods
  • Cheaper loans.




  • Extending renewable energy status to large projects will make them eligible for incentives like funding and access to cheaper credit.
  • Financial incentives will significantly bring down the cost of production and thus help in rationalization of tariff by hydro power projects.
  • Infrastructure financing and inclusion of cost of flood moderation will make it viable for private players
  • Entry of private players can significantly increase capacity and production.
  • All these factors will significantly reduce the price of power for consumers.
  • Finally, large hydro projects will significantly help India achieve its target of renewable energy production of 175 GW by 2022.

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