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Synergy for power: Moving to public and private hydropower partnerships in India

Shekhar Gupta is CEO of Himagiri Hydro Energy, a hydropower power plant manufacturer in India

Posted: 
13. February 2014 - 9:34
Synergy between public and private sectors will develop hydropower potential in India, says Shekhar Gupta. But the industry first needs to adopt a model which will enable fruitful partnerships between the sectors

The importance of energy needs in any developing country like India, are well recognised. But after the initial thrust to construct storage dams to generate hydropower projects a few decades ago, the enthusiasm has given way to virtual inertia and only 40,000MW of hydro power capacity has been installed in India in the last 65 years. This is just 27 per cent of the identified hydropower potential in the country.

National Hydro Power Corporation (NHPC), a state owned outfit, has been able to achieve installation of around just 5700MW of capacity in the last four decades, despite financial and technical support from the government. Although 97 per cent of installed capacity is in the public sector, the achievements of the government sector, in recent years, leave much to be desired.

Despite the legal framework for forging a fruitful public-private partnership (PPP) in developing hydropower being offered by the Electricity Act of 2003, efforts by the union and state government in this direction still remain half hearted. A suitable roadmap, benefitting from the synergy of public and private sectors to exploit untapped hydropower potential, is yet to be prepared. Meanwhile, issues, such as undue delays in clearances, land acquisition, financial closure and local resistance still hinder private sector investors in the hydropower sector.

Channelising synergy

In India, a country which houses one fifth of the global population, not well endowed with fossil fuels, with energy needs growing rapidly, conscious efforts are required to channelise the synergy between the vibrant private sector and experienced government sector.

The existing power policies of various state governments need to be more investor friendly. The existing basis of bidding, for example, which offers more upfront premium or more free power to government, hits the viability of hydro projects hard, resulting in higher cost of construction and resultant higher tariffs. The synergy of both these sectors can be achieved with a well-defined concession agreement and pragmatic basis for bidding.

There is the need to adopt a well-defined, investor-friendly PPP model by leglislating a federal law, which enables fruitful partnerships between public and private sectors. In addition to assisting private investors in obtaining timely clearances, the government could facilitate timely project loans through state-owned financial institutions, and share knowledge of risk during project execution.

Exploiting potential

Synergy between the public and private sector in exploiting hydropower potential would complement and supplement the two sectors. While projects of national importance, as well as those involving interstate and international territories can be handled by government-owned companies, other projects could be allocated in PPP mode. Government partnership would make sure that pre-construction problems, faced by many privately owned hydro power projects, are reduced to minimum. Inherent lethargy and inefficiencies of the public sector, on the other hand, would be replaced with efficient private management facilitated by professionalism, quick decision making and constant monitoring.

Hydro Power offers a viable option for generating clean and renewable energy. Quicker exploitation of its potential with a PPP mode would also go a long way in replacing the need to set up more thermal power plants. Although the initial cost of hydro is slightly higher, its generation cost is significantly lower than thermal power plants, as inputs, such as coal or gas, are not required for generation.

Expeditious execution

For a country like India, so heavily dependent on imported oil and other fossil fuels, hydropower offers an opportunity for the substitution of coal imports. Thereby, to some extent, this reduces the stress on precious foreign exchange. Expeditious execution of hydropower projects would also help reduce the volume of harmful carbon emissions in the environment. So, let the country benefit from more availability of cleaner energy through the synergy of partnership between the government and corporate sectors. And the earlier, the better.