Union Cabinet approves Rs 4136 crore aid for Hydro projects in Northeast

Cabinet approves Central Financial Assistance towards Equity Participation by the State Governments of the North Eastern Region for the development of Hydro Electric Projects in the North Eastern Region

The Union Cabinet chaired by Prime Minister Narendra Modi has approved the proposal of the Ministry of Power for providing Central Financial Assistance (CFA) to the State Governments of NER towards their equity participation for the development of Hydro Electric Projects in the North Eastern Region (NER) through Joint Venture (JV) Collaboration between State entities and Central Public Sector Undertakings.

This scheme has an outlay of Rs. 4136 crore to be implemented from FY 2024-25 to FY 2031-32. 

A cumulative hydro capacity of about 15000 MW would be supported under the scheme. The scheme would be funded through 10% Gross Budgetary Support (GBS) for the North Eastern Region from the total outlay of the Ministry of Power.

The Scheme formulated by the Ministry of Power provides for the formation of a Joint Venture (JV) Company for all the projects of a Central PSU with the State Govt.

The grant towards the equity portion of the State Government of NER would be capped at 24% of the total project equity subject to a maximum of Rs.750 crore per project. The cap of Rs.750 crore for each project would be revisited, if required, on a case-to-case basis. The equity ratio of the CPSU and the state government in the JV will be maintained at the time of disbursing the grant.

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Central Financial Assistance would be limited to only viable Hydro Electric Projects. States would be required to waive/stagger free power and/or reimburse SGST to make the project viable.

With the introduction of this scheme, participation of the State Governments in the hydro development shall be encouraged and risk and responsibilities shall be shared in a more equitable manner. The issues such as land acquisition, rehabilitation & resettlement and local law & order issues would be reduced with State Governments becoming stakeholders. This would avoid time and cost over-run of the projects.

This scheme shall play a significant role in harnessing the hydro power potential of North East. It would bring huge investment in the North Eastern Region and would provide large number of direct employment to the local people along with indirect employment / entrepreneurial opportunities through transportation, tourism, small-scale business. Development of hydroelectric projects shall also contribute towards realization of India’s Nationally Determined Contribution (INDC) of establishing 500 GW renewable energy capacity by 2030 and would help integration of RE sources in the grid thus enhancing flexibility, security and reliability of the national grid.

The Government of India has been taking several policy initiatives to address the issues impeding Hydro Power development. To promote the hydro power sector and to make it more viable, the Cabinet, on 7th March, 2019, approved measures, viz., declaring large hydro power projects as Renewable Energy sources, Hydro Power Purchase Obligations (HPOs), tariff rationalization measures through escalating tariff, budgetary support for flood moderation in storage HEP and budgetary support for the cost of enabling infrastructure, i.e., construction of roads and bridges.