The target of adding 10,800 MW of hydro power capacity in the 12th Plan may fall short by about 30 per cent, according to analysts. Currently, around 11,400 MW of projects are reeling under time and cost overruns. Poor geology, delays from contractors, local resistance and adverse weather conditions affecting logistics and operations are being cited as the main reasons for delays.
“Around 265 MW is expected to come up in the second half of 2013-14 and another 2,500-3,000 MW in 2015-16. Looking at the progress of capacity under construction, we expect the capacity addition target to be missed by 30 per cent in the 12th Plan,” said Rupa Shah, an analyst at Prabhudas Lilladher, a brokerage firm.
These projects are being implemented by both public sector (NHPC and SJVN) and private sector (NCC, NSL, GVK and L&T) companies.India had 39,893.4 MW of hydro capacity out of 232,164.94 MW total installed capacity in the country as on November 30.
According to the Union Power Ministry, most hurdles related to the delay in commissioning hydro projects are within the purview of States.
For example, projects in Arunachal Pradesh are stuck because the State doesn’t have enough funds to bear its share of equity investment. Jindal Power Ltd has taken up three hydro power projects of over 5,000 MW capacity in which Hydro Power Development Corp of Arunachal Pradesh Ltd has 26 per cent stake.
Cost overrun Similarly, NHPC has so far suffered cost overrun of more than Rs 1,000 crore on the Subansiri hydro power project on the Assam-Arunachal Pradesh border, which has been stalled due to protests by local residents. The 2,000-MW project was expected to be commissioned in September 2010.
“The ministry has taken up the matter, as hydro projects are now exempted from submission of forest clearances application. But the States will have to resolve their own issues,” a senior Power Ministry official said, requesting anonymity.
According to Rao of PwC India, hydro electric projects face a number of developmental challenges, but the most significant one is securing competitive long-term financing.
The absence of long-term competitive finance compounds all other problems, which largely are the long gestation period, high cost of access infrastructure to be built, and potential time and cost overrun due to unexpected geological faults.
“This sector can develop if the Government is able to channel financing from multilateral agencies and other long-term investors such as pension funds and sovereign wealth funds into a vehicle set up to finance hydro projects,” he added.
In terms of cost, the projects currently under construction have crossed on average at least 30 per cent overrun of the original investment programme.