In a strategic move to bolster hydroelectric power development in India’s North Eastern Region (NER), the Union Cabinet, led by Prime Minister, Narendra Modi, has approved a significant proposal from the Ministry of Power. The decision involves providing Central Financial Assistance (CFA) to state governments in the NER for their equity participation in hydroelectric projects. These projects will be developed through Joint Venture (JV) collaborations between state entities and Central Public Sector Undertakings (CPSUs).
Major Financial Outlay for Hydro Development
The scheme, which is set to be implemented from FY 2024-25 to FY 2031-32, has a substantial outlay of Rs. 4,136 crore. It aims to support the development of a cumulative hydroelectric capacity of approximately 15,000 MW across the North Eastern states. This initiative is part of the broader strategy to harness the untapped hydro potential of the region and is funded through 10% Gross Budgetary Support (GBS) from the Ministry of Power’s total allocation.
Joint Ventures to Drive Hydro Projects
The Ministry of Power has structured the scheme to encourage the formation of Joint Venture (JV) companies between CPSUs and state governments for all hydro projects. Under this arrangement, the equity participation of state governments will be supported by a grant capped at 24% of the total project equity, with a maximum of Rs. 750 crore per project. This cap may be revisited on a case-to-case basis, ensuring flexibility in addressing project-specific needs. The equity ratio between CPSUs and state governments will be maintained when disbursing the grant, which will only apply to viable hydroelectric projects.
Streamlining Project Viability
To ensure the viability of these hydro projects, state governments are expected to waive or stagger free power obligations and reimburse State Goods and Services Tax (SGST). These measures are aimed at reducing financial burdens on the projects, making them more attractive to investors and stakeholders.
Enhanced State Participation and Risk Sharing
The approval of this scheme is expected to significantly enhance state government participation in hydro development, leading to a more equitable distribution of risks and responsibilities. With state governments as stakeholders, challenges related to land acquisition, rehabilitation, resettlement, and local law and order are anticipated to be minimized. This collaborative approach is designed to prevent time and cost overruns, which have historically plagued large infrastructure projects in the region.
Economic and Employment Boost for North East
The hydroelectric projects under this scheme are expected to bring substantial investment to the North Eastern Region, fostering economic growth and generating employment. The projects will create numerous direct jobs for local residents, along with indirect employment and entrepreneurial opportunities in sectors such as transportation, tourism, and small-scale businesses.
Contributing to National Renewable Energy Goals
These hydro projects will play a crucial role in achieving India’s commitment to its Nationally Determined Contribution (NDC) of establishing 500 GW of renewable energy capacity by 2030. By integrating renewable energy sources into the national grid, the projects will enhance the flexibility, security, and reliability of India’s power infrastructure.
Government’s Commitment to Hydro Power Development
The Government of India has been proactive in addressing challenges in the hydroelectric sector. In March 2019, the Cabinet approved several measures to promote hydro power, including declaring large hydro projects as renewable energy sources, introducing Hydro Power Purchase Obligations (HPOs), and providing budgetary support for flood moderation and infrastructure development. These initiatives, coupled with the newly approved CFA scheme, underscore the government’s commitment to making hydro power a cornerstone of India’s renewable energy strategy.
