Private investors wary of small hydro

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THE POTENTIAL of small hydro power in the country has been estimated at nearly 5,000 mw, but only about 86 mw have been realised. Of this, about 25 mw is from micro hydel schemes. In the Eighth Plan, a capacity of 256 mw is expected to be added, of which about 70 mw will be in the hilly areas of Himachal Pradesh, east Uttar Pradesh and northeast India.

The Eighth Plan allocation for the small hydro sector is about Rs 100 crore, against the Rs 300 crore sought by the ministry of nonconventional energy sources (MNES). However, MNES has succeeded in attracting about $7.5 million (Rs 21 crore) from the Global Environment Facility (GEF) for developing small, mini and micro hydel potential in the Himalaya foothills. Approval for an additional Rs 90 crore is awaited.

The GEF funding, which will be channelled through the Indian Renewable Development Agency (IREDA), MNES' financing arm, requires private entrepreneurs and investors to make matching investments in hydel projects.

However, a national workshop on small hydro held in Shimla in July 1993 failed to attract prospective investors or promoters who could set up captive hydel stations and sell power to state electricity boards or third parties. IREDA managing director V Bakthavatsalam lamented, "The ministry has done its best to expand small hydro project capacity, secure external funding and amend laws, but not a single project is ready to be financed."

Project delays have arisen mainly because state governments have either not identified prospective sites or have not obtained environmental clearances for them. Private entrepreneurs are also "waiting to see a change of heart in the government, because despite the fanfare and invitations extended to them, the irrigation and power departments still treat them like encroachers on their territory."

Investors are also deterred by tendering procedures that are as cumbersome and complex as those for large projects. This is compounded by the uncertainty and delay that dog clearances from the ministry of environment and forests (MEF) or their state departments.

For instance, projects of less than 10 mw capacity require forest and environment clearance. MNES intends to suggest this limit be raised to 15 mw or 25 mw. MNES also proposes that clearance procedures be dispensed with for projects of 100 kw or less.

However, at the workshop, no guarantees were forthcoming. MNES secretary L M Menezes stated only that "the ministry would do its best to liaise with the MEF to speed up procedures and to propose amendments to laws."