Govt mulls longer fixed cost recovery period for hydro power

The ministry is working on the hydro power policy to provide Rs 16,000 crore assistance to projects to promote the clean source of energy and it is expected to be tabled before the Union Cabinet for approval this month.

"The depreciation period should also be increased to reduce the (fixed) cost of hydro plants. The life of hydro power plants is above 70 years," Singh, who is also the minister of new and renewable energy, said in an interview.

"Thus, the depreciation should be spread over 30-35 years instead of 12 because tariff is linked with depreciation," he added.

He said it happens with a lot of hydro power plants that the tariff remains high at Rs 6 per unit during the recovery period and after realisation of fixed cost, it comes down to 80 paisa per unit. Extending the recovery period will levelise the tariff and bring it down to as low as Rs 2 per unit, making it more viable, Singh said.

Talking about other steps being considered for hydro projects, he said: "We want to segregate irrigation and power components of hydro plants from the project cost so that it gets subsidy (for irrigation components)." India, he said, has realised about 45 GW, out of 145 GW hydro power potential in the country.

"That is the cleanest energy available. But it has to be viable. Solar and wind would not work without hydro. Thus, time of the day tariff would be part of Electricity Act amendment bill. We are also bringing also bringing hydro policy to boost the segment," he said.

Singh also talked about boosting domestic manufacturing capacity of solar equipment saying that the new tenders would provide for setting up production capacities here by bidders.

"We want to bring two expressions of interest for setting up domestic manufacturing capacities of solar equipment. That would be for polysilicon...," he said. Only those bidder would be able to bid who would set up manufacturing capacities here in India from polysilicon onwards, Singh added.

He further said that the government would buy equipment to aid generation of 20 GW but the bidders would set up manufacturing capacity in stages.

"They would set up manufacturing capacity for solar cell and modules in first year. In second year they would set up capacity for solar wafers. In third stage, they would set up capacity for polysilicon," he said.