Indian Cabinet approves Rs.12,461cr for hydro power infrastructure boost

In a significant move aimed at bolstering India’s renewable energy sector, the Union Cabinet, led by Prime Minister Narendra Modi, has approved a substantial modification in the budgetary support scheme for the cost of enabling infrastructure for Hydro Electric Projects (HEPs). This initiative, proposed by the Ministry of Power, involves an outlay of Rs.12,461 crore and is set to be implemented from the fiscal year 2024-25 through to 2031-32. The approved scheme is designed to enhance infrastructure in remote and challenging locations where hydroelectric projects are located, aiming to support the generation of 31,350 MW of hydropower.

Massive outlay to strengthen hydroelectric infrastructure

The modified scheme aims to widen the scope of budgetary support to include additional infrastructure categories. Previously focused primarily on the construction of roads and bridges, the support now extends to cover costs associated with transmission lines from power houses to the nearest pooling points, upgrading pooling substations of state or central transmission utilities, ropeways, railway sidings, and communication infrastructure. This comprehensive support plan will also fund the strengthening of existing roads and bridges leading to project sites. This extension of budgetary support underlines the government’s commitment to overcoming the logistical challenges that have long plagued the development of hydroelectric power in India.

According to the Ministry of Power, this revised scheme will also be applicable to all hydroelectric projects above 25 MW capacity, including those in the private sector, provided they have been awarded on a transparent basis. Moreover, the scheme will support Pumped Storage Projects (PSPs), encompassing both captive and merchant PSPs, with an estimated cumulative capacity of 15,000 MW.

Revised financial limits and eligibility criteria for projects

The financial limits for budgetary support under the scheme have been carefully rationalised to ensure effective utilisation of funds. For hydroelectric projects up to 200 MW, the support is capped at Rs.1 crore per MW. For larger projects exceeding 200 MW, the support is set at Rs.200 crore plus an additional Rs.0.75 crore for every MW over the 200 MW mark. In exceptional cases, where there is sufficient justification, the budgetary support may go up to Rs.1.5 crore per MW. Projects are eligible if their Letter of Award for the first major package is issued by June 30, 2028.

Implications for India’s renewable energy goals

Experts believe that this substantial investment in hydroelectric infrastructure will significantly contribute to India’s renewable energy goals. The focus on comprehensive infrastructure development is expected to fast-track the completion of hydroelectric projects, especially in remote and hilly areas, and provide a boost to local economies through employment opportunities and small business growth. An expert from the renewable energy sector highlighted that the scheme’s broader support for infrastructure such as communication and railway sidings could lead to better accessibility and reduced costs, thereby incentivising further investments in the sector.

The modifications to the budgetary support scheme align with India’s broader strategy of diversifying its energy mix and enhancing energy security. By expanding the financial support framework, the government aims to make hydroelectric projects more financially viable, particularly in geographically challenging regions where infrastructure costs have traditionally been a barrier.

Expert perspective on the revised scheme

Industry experts see this move as a strong signal of the government’s commitment to sustainable energy development. It is anticipated that the revised scheme will create an enabling environment for timely completion of hydroelectric projects and attract both domestic and international investments. An energy policy analyst noted that by covering a broader range of infrastructure needs and ensuring transparent allocation of projects, the revised scheme could encourage more participation from the private sector and spur innovation in renewable energy technologies.