| New Delhi: The recently granted renewable power status and budgetary support for infrastructure associated with large hydro projects is a major positive move, research agency ICRA said. The centre has declared large hydro power projects with capacity of more than 25 Megawatt (MW) as renewable energy projects. It has also approved a separate hydro power purchase obligation (HPO) under non-solar renewable power obligation (RPO) to cover large hydro power projects commissioned post notification of the norms. The government has also approved budgetary support for certain measures which are aimed at enabling implementation and modernization of hydro power projects and proposed certain tariff rationalization measures. “The measures approved, such as designation of longer useful life, back-loading of tariffs and provision of budgetary support for infrastructure associated with hydro projects will improve tariff competitiveness for hydro power projects," Sabyasachi Majumdar, Group Head-Corporate ratings at ICRA said. "We estimate that these measures are likely to reduce the levelized cost of generation for a 100 MW hydro power project by around 35 paise per unit over its useful life. Further, the regulatory support through a separate HPO is positive for new hydro power projects, although timely adoption and implementation by respective State Electricity Regulatory Commissions (SERCs) will remain critical,” he said.The Government has approved HPO and tariff rationalisation norms with the objective to promote large hydro projects, given the slowdown in addition of new capacities in this segment over the past few years. The annual HPO trajectory will be notified by the ministry of power with required amendments to the existing tariff policy and regulations. The tariff rationalisation measures include providing flexibility to the developers to back-load tariff, increasing debt repayment period to 18 years and escalating tariff by two per cent. Also, the budgetary support for funding cost of supporting infrastructures such as roads and bridges will be on a case-to-cases as per actuals, subject to a limit of Rs 1.5 crore per MW for hydro power projects up to 200 MW and Rs 1 crore per MW for hydro power projects above 200 MW. Budgetary support will also be provided for funding flood moderation component of hydro power projects on a case-to-case basis. |