evaluation of small hydro power (shp) programme of mnre

Final Report

Evaluation of Small Hydro Power

(SHP) Programme of MNRE

Ministry of New & Renewable Energy (MNRE),

Government of India

2017

Final Report - Evaluation of Small Hydro Power (SHP) Programme of MNRE

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ........................................................................................................................ 6

1 INTRODUCTION ............................................................................................................................ 14

1.1 SHP IN INDIA ............................................................................................................................. 14 1.2 KEY OBJECTIVE OF THE ASSIGNMENT ........................................................................................... 14

2 SMALL HYDRO POWER SECTOR IN INDIA ............................................................................... 15

2.1 SHP CAPACITY DEVELOPMENT ................................................................................................... 15 2.2 SHP POTENTIAL IN INDIA ............................................................................................................ 16 2.3 KEY DRIVERS FOR SHP PROJECTS IN INDIA.................................................................................. 18 2.4 KEY ISSUES IN SMALL HYDRO SECTOR ......................................................................................... 20

3 SHP POLICY & REGULATORY REVIEW ..................................................................................... 22

3.1 NATIONAL LEVEL POLICY REVIEW ................................................................................................ 22

4 ANALYSIS - KEY FINDINGS FROM PROJECT SURVEY & REVIEW ........................................ 24

4.1 APPROACH FOR SURVEY............................................................................................................. 24 4.2 TECHNICAL ANALYSIS ................................................................................................................. 25 4.3 POLICY FRAMEWORK .................................................................................................................. 32 4.4 COMMERCIAL ............................................................................................................................. 48 4.5 REGULATORY ............................................................................................................................. 51 4.6 FINANCIAL ASPECTS ................................................................................................................... 53 4.7 EMPLOYMENT AND ECONOMIC BENEFITS ..................................................................................... 57 4.8 R&D AND HUMAN RESOURCE DEVELOPMENT ............................................................................... 58 4.9 WATER MILLS PROJECTS ............................................................................................................. 65

5 RECOMMENDATIONS / LEARNINGS SPECIFIC TO PROGRAMME IMPLEMENTATION ON SHP SCHEME ...................................................................................................................................... 70

5.1 POLICY TARGETS & PLANNING .................................................................................................... 70 5.2 INCENTIVE SCHEME FOR SHP ..................................................................................................... 70 5.3 INSTITUTIONAL STRENGTHENING ................................................................................................. 74 5.4 SCHEME FOR WATER MILLS ........................................................................................................ 76 5.5 RESOURCE ASSESSMENT ........................................................................................................... 77 5.6 R&D AND HUMAN RESOURCE DEVELOPMENT .............................................................................. 78 5.7 REGULATORY INTERVENTIONS .................................................................................................... 79

6 ANNEXURE 1 : PROJECT SURVEY DETAILS ............................................................................ 80

6.1 LIST OF SHP PROJECTS SURVEYED ............................................................................................ 80 6.2 LIST OF SHP PROJECTS SURVEYED ............................................................................................ 83

7 ANNEXURE 2 : APPROVAL TIMELINES ..................................................................................... 84

LIST OF FIGURES

Figure 1 : RE Capacity addition trend ..................................................................... 15 Figure 2: SHP annual capacity additions ................................................................. 16 Figure 3 : Geographic spread of field visits ............................................................. 24 Figure 4 : Power Evacuation issues ........................................................................ 27 Figure 5 : AHEC Capital Cost benchmarks .............................................................. 54 Figure 6 : Capital Cost escalation issues ................................................................. 55 Figure 7 : Economic benefits of SHP ...................................................................... 57 Figure 8 Micro Turbine Testing Lab ........................................................................ 60 Figure 9 Inspection Kit Room ................................................................................ 60 Figure 10 New Turbine Testing Facility ................................................................... 60 Figure 11 Real Time Simulator for SHP Plants and Training Facility ............................ 60


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LIST OF TABLES

Table 1: SHP Projects classification in India ............................................................ 14 Table 2: Achievement status of RE projects ............................................................ 15 Table 3: Summary of Total Potential SHP Project capacities across States .................. 16 Table 4: MNRE Incentive Schemes for SHP ............................................................. 22 Table 5 : Resource assessment issues ................................................................... 28 Table 6 : Water Availability issues ......................................................................... 30 Table 7 : O&M Cost benchmark - CERC .................................................................. 31 Table 8 : O&M issues ........................................................................................... 31 Table 9: Project allocation process parameters for select States ................................ 37 Table 10: List of clearance and reference clauses for SHP project in Himachal Pradesh 43 Table 11: List of clearance and reference clauses for SHP project in Uttarakhand ........ 44 Table 12 : Approval & Clearances issue .................................................................. 45 Table 13 : Overall feedback on clearances .............................................................. 47 Table 14 : Options for public funding ..................................................................... 49 Table 15 : Preferred incentives ............................................................................. 50 Table 16 : Capital Cost & Tariff benchmark - CERC .................................................. 51 Table 17 : Capital Cost & Tariff benchmark - SERC .................................................. 51 Table 18 : Capital Cost break-up ........................................................................... 54 Table 19 : Capital Cost escalation .......................................................................... 55 Table 20 : Survey feedback – cost over-run ........................................................... 56 Table 21 : Current scheme of MNRE ...................................................................... 58 Table 22 : Facilities at AHEC ................................................................................. 59 Table 23: Technology Commercialization Mechanism ............................................... 61 Table 24 : Training Programs offered by AHEC ........................................................ 62 Table 25 : List of standards for SHP projects .......................................................... 63 Table 26 : Feedback from AHEC on Issues .............................................................. 65 Table 27 : Various Issues as identified during the survey- Watermills ........................ 67


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Abbreviations

Abbreviation Details

AHEC Alternate Hydro Energy Centre

APEDA Arunachal Pradesh Energy Development Agency

CAGR Compound Annual Growth Rate

CB Canal Based

CDM Clean Development Mechanism

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

CFA Central Financial Assistance

COD Commercial Operation Date

CPP Captive Power Producer

CUF Capacity Utilization Factor

CWC Central Water Commission

DB Dam Based

DC District Collector

DHPD Department of Hydro Power Development

DoE Directorate of Energy

DPR Detailed Project Report

DSI Detailed Survey and Investigation

E&M Electrical & Mechanical

EA Electricity Act

EMC Energy Management Centre

EPC Engineering, Procurement & Construction

FCA Forest Conservation Act

FI Financial Institution

FIT Feed In Tariff

FR Feasibility Report

FY Financial Year

GBI Generation Based Incentive

GEF Global Environment Facility

GoUK Government of Uttarakhand

GW Giga Watts

HH House Holds

HIMURJA Himachal Pradesh Energy Development Agency

HP Himachal Pradesh

HPERC Himachal Pradesh Electricity Regulatory Commission

IA Implementation Agreement

INR Indian Rupee

IPP Independent Power Producer

IREDA Indian Renewable Energy Development Agency

ISTS inter-state transmission on system

IT Information Technology

J&K Jammu and Kashmir


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KBJNL Krishna Bhagya Jala Nigam Limited

KPCL Karnataka Power Corporation Limited

KREDL Karnataka Renewable Energy Development Limited

kW Kilo Watt

LCOE Levelized Cost of Energy

LOA Letter of Allotment

LoC Line of Credit

MHP Micro Hydel Project

MNRE Ministry of New and Renewable Energy

MOEFCC Ministry of Environment, Forest and Climate Change

MOEFCC Ministry of Environment and Forest

MOP Ministry Of Power

MUs Million Units

MW Mega Watt

NE North East

NGO Non Government Organization

NOC No Objection Certificate

NPA Non Performing Asset

NREDCAP New and Renewable Energy Development Corporation of Andhra

Pradesh

O&M Operation and Maintenance

OA Open Access

PAC Project Approval Committee

PCB Pollution Control Board

PEDA Punjab Energy Development Agency

PFR Pre Feasibility Report

PLF Plant Load Factor

PPA Power Purchase Agreement

PSERC Punjab State Electricity Regulatory Commission

PSU Public Sector Undertaking

PWD Public Works Department

R&D Research and Development

RD&D Research Design and Development

RE Renewable Energy

REC Rural Electrification Corporation

ROR Run of River

ROR Run of River

SEB State Electricity Board

SECI Solar Energy Corporation of India

SERC State Electricity Regulatory Commission

SHP Small Hydro Power

SNA State Nodal Agency

SPCB State Pollution Control Board

STU State Transmission Utility


v


TAC Technical Appraisal Committee

TC Technical Concurrence

TEC Techno-Economic Clearance

UJVNL Uttarakhand Jal Vidyut Nigam Limited

UNDP United Nations Development Project

UREDA Uttarakhand Renewable Energy Development Agency

UT Uttarakhand

VGF Viability Gap Funding

WM Water Mill

WRDO Water Resources Development Organization


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Executive Summary

INTRODUCTION

With energy security and climate change concerns taking center stage in the policy arena,

Renewable Energy (RE) has become an important part of the energy sector initiatives in

India. To this effect the government has set aggressive targets and has put in place several

incentives and policy initiatives (for both grid connected and off-grid).

The Govt. of India targets for achieving 175 GW by year 2022. The target comprises of

100 GW of solar power, 60 GW of wind power, 10 GW of biomass power, and 5 GW of

small hydro power (SHP). The Ministry of New and Renewable Energy (MNRE) has been

entrusted with the overall responsibility of development of RE including small hydro

sector in India. MNRE has been implementing the SHP programme and under this

initiative more than 600 SHP projects (public and private) have been supported by the

Ministry.

ACHIEVEMENT OF SHP SCHEME

The potential of the small hydro projects in India is estimated at 21,135 MW. This

potential is large enough to meet the local demand both in the form of electrical power

as well through mechanical output (Water Mills, etc) in remote areas. Capacity addition

in the small hydro power sector has grown at a CAGR of 9% since FY 2008.

Source: MNRE Annual Reports, CEA Report

Ministry of New & Renewable Energy (MNRE) is providing policy support in the form of

capital subsidy, central financial assistance, & other initiatives for the SHP sector. One of

the aims of promotion of Small Hydro Power is to enhance the socio-economic status of

remote and rural areas in power generation.

The types of financial incentives principally are specific to grid connected and off grid

respectively. Some of the highlights of MNRE schemes under various categories are

indicated below.

S No Category of

Subsidy

Description Amount of subsidy

1 Resource

assessment

Scheme to support site

identification,

preparation of DPR, site

INR 6 Lakh for up to 1 MW

station capacity


7

S No Category of

Subsidy


surveys, investigations

etc.

INR 10 Lakh for more than 1

MW and up to 25 station

capacity

2 Private sector

setting up

SHP projects

New SHP projects in

private / cooperative,

Joint sector etc.

Special Category States (NE,

HP, Uttarakhand & J&K): INR

1.5 Crore per MW

Other States: INR 1 Crore per

MW

Limited up to INR 5 Crore per

project for both categories

Capacity limits- Above 0.1 MW

and upto 25 MW

3 Government

Sector SHP

New SHP projects in

Government Sector

Category of projects – above

100 KW & upto 1 MW


HP, Uttarakhand & J&K): - INR

75,000 per kW

Other States: INR 35,000 per

kW

Category of projects - above 1

MW & up to 25 MW


HP, Uttarakhand & J&K): INR

7.5 Crore per MW

Other States: INR 3.5 Crore

per MW

Limited CFA up to INR 20 Crore

per project for both categories

4 Renovation Renovation and

modernization of existing

SHP Projects in

Government Sector

All States and UTs

Up to 1,000 KW: INR 10,000

per kW

Above 1 MW & upto 25 MW:

INR 1 Crore per MW limited to

INR 10 Crore per project

5 Water Mills

(WM) &

Micro Hydel

Projects

(MHP)

Support for development

/ modernization of Water

mills (Mechanical /

electrical output) and

setting up MHP projects

up to 100 kW

Mechanical Output only: INR

50,000 per Watermill

Electrical output or combined

mechanical/ electrical output –

INR 1,50,000 per Watermill

Maximum size of Watermill for

availing benefit – 5 kW

For MHP project upto 100 kW

capacity – INR 1,25,000 per

kW

6 Research &

Development

Financial support for

Research & Development

and Capacity Building

Upto 100% of the activity cost

for capacity building on case to

case basis


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OBJECTIVE OF ASSIGNMENT & KEY OBSERVATIONS

The Ministry is in the process of revising the existing SHP program/ scheme. The

objective of this assignment was to evaluate the MNRE programme / scheme

implemented during 12th Five Year Plan period and propose changes in the design for

SHP scheme. As a part of the assignment, the overall benefits & issues related to the

SHP scheme were assessed through direct data collection through field visits and

conducting consultations with key stakeholders such as project developers, and nodal

agencies, etc. Based on discussion with MNRE, the following states were shortlisted for

undertaking the survey:

1. Arunachal Pradesh

2. Uttarakhand

3. Karnataka

4. Himachal Pradesh

5. Andhra Pradesh

6. Punjab

7. Kerala

The summary of sites (SHP & water mill) covered as a part of field survey across

different States is detailed in the figure below:

It was observed that the current MNRE SHP scheme has been pivotal in shaping the

sector. At the national level, the two main benefits that accrue from a SHP plant are

stable source of clean power and employment. Apart from these, one major positive

externality is development of infrastructure such as roads and improved accessibility in

remote rural areas. Small hydro power capacity addition is valuable in terms of grid

stability given its stable nature as a source of power. States find it beneficial to develop

small hydro resources for meeting its growing demand. Under the MNRE SHP scheme,

power plants upto 25 MW capacity have been supported in various states and thereby

assisting in achievement of the national objectives.

At a local level, small hydro and micro hydel power plants provide power to local village

communities located in remote areas, where national grid infrastructure is inadequate


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such as in north east. Access to power in these areas is critical to support socio-

economic development. MNRE SHP scheme supports 100 KW micro hydel power projects

in remote areas across States such as Arunachal Pradesh and assists in bringing light

into the lives of its people.

Watermills have long been a source of livelihood in hilly areas such as Uttaranchal,

Himachal Pradesh, North East India, and Kerala. Its various applications include rice

hulling, milling of grains, electricity generation, and other mechanical applications. It

provides owners, who are residents of local villages, to maintain a traditional way of

living and maintaining a sustainable livelihood. Under the SHP scheme, MNRE works with

state nodal agencies in supporting local communities in villages to establish watermills

and increase the standard of living.

The growth of SHP sector has slowed down over the last few years. The main reason for

slow progress is the lack of private sector participation in SHP projects, difficulties with

development in complex terrain of hilly areas, getting rights to develop on private and

forest land , delayed allotment and statuary clearance approval for establishment of

SHP projects among others. The details of select issues are described in below sub

sections.

Pre-Construction

Resource assessment / lack of hydrological data: There is a lack of reliable

hydrological data required for assessing financial and technical feasibility of SHP

projects in the various regions of India. Data which can provide information on the

intermittent flow of water is vital for estimation of energy generation / CUF of the

potential SHP project site.

Inaccurate or inadequate data leads to faulty design parameters and may result in

financial losses over a lifetime of project;

Various approvals and clearances such as techno-economic clearance, land allotment

approval, Forest clearance, and Water rights by State irrigation departments, NOC

from Fisheries and State Pollution Control Board (SPCB) have been reported to have

lengthy timelines and procedures vary from State to State.

Construction

Remote location in hilly and mountainous regions pose several infrastructural

constraints, which increases the risks related to timelines in setting up SHP projects.

The hurdles due to locations further prolong the time lines required to set up SHP

projects when compared to other RE projects.

These hurdles also increase the risk of cost overruns.

Land availability

Land acquisition has been a cause of delay.

States have also given low priority to SHP due to higher focus on large scale power

plants, in select cases.

High costs of land for SHP development is an issue.

Developers have to face delays in land acquisition or petition district administration

or negotiate to bring the cost of the land down.

Power evacuation

Distributed nature of projects usually at remote locations with limited or no

evacuation infrastructure impacts harnessing the potential

Small size of projects which usually means limited economic viability for stretching

transmission lines only for the project


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Transmission lines usually pass through forest areas – clearances for transmission

lines faces delays – often delaying projects

Acquiring land for transmission and other infrastructure projects proves difficult and

time consuming

Dependence on low capacity rural networks for evacuation of power

SHP developers have to incur substantial cost for evacuation of power generated

from the renewable energy based projects.

Tariff

States across India have a varying tariff structure and given the unique nature and

risks involved for each SHP project developer, tariff levels are generally insufficient to

attract investments. The SERC benchmark tariffs are much lower when compared to

CERC determined SHP tariffs.

Financing

The risks associated with SHP project results in an increase in the cost of borrowing

for developers. This makes SHP projects unattractive when compared to other RE

technologies.

Operational Issues

Old Turbines running at low load factor: Efforts of the Government is to develop new

technology and engineering solutions such as low head turbines to set up low /

ultralow head (below 3 m) SHP projects.

High silting issues in certain river basins results in high level of O&M cost for

developers.

KEY RECOMMENDATIONS

The Government of India has set a target of 5 GW of SHP installation by year 2022.

Perennial or intermittent flow of natural water streams in hilly areas of India, canals, and

dam outlets provide excellent opportunity for developers to tap into this potential and

help in meeting the energy demand of local communities residing in hilly and remote

areas.

SHP as a source is considered to be very effective way for power generation for rural

areas and creates economic potential to provide livelihoods at local level across

geographies in the Country.

The MNRE SMALL HYDRO POWER PROGRAMME (upto 25 MW Capacity) provides

incentive framework for promotion of SHP projects. The Ministry of New and Renewable

Energy (MNRE) is encouraging setting up of Small Hydro Power (SHP) projects in the

private sector, joint sector, co-operative sector, etc.

Based on the field visits undertaken and stakeholder consultations various issues were

identified, below are the set of recommendations proposed to further strengthen the

MNRE SHP Scheme:

1. The State Govt. should submit the annual SHP development plan to MNRE every

year. The annual SHP development plan to provide details on the expected new SHP

projects & capacity (in MW) proposed to be allocated, under-construction project

(with status of project), expected projects to be commissioned in the financial year,

number of sites to be selected for resource assessment/DPR preparation, projects

proposed to undertake renovation & modernization, number & capacity of water-mills

to be supported. The Ministry should examine the annual SHP development plan and

finalize the budget allocation (advance expected for current year, plan for

subsequent years) for State specific development of SHP projects.


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2. MNRE shall undertake detailed technical study to identify clusters having high

potential and probability of getting harnessed for achieving the year 2022 SHP

target. The study shall also identify the phase wise planning required at State and

Central level including the power infrastructure requirement for clusters with high

SHP potential.

3. Incentive scheme for SHP

a. It is recommended that MNRE should continue providing capital subsidy as

incentive to SHP projects. The capital subsidy shall be defined as a % of

actual project cost or CERC benchmark capital cost, whichever is lower. In the

scheme, MNRE should clearly define the maximum cap in the form of Rs Lakh

per MW as well as Rs Lakh per project.

b. A separate nodal agency shall be nominated by MNRE with responsibility of

evaluation of subsidy application, approval and disbursement of subsidy to

SHP projects and water mills. The key options for nodal agency can be State

Nodal Agency, IREDA, SECI etc. The nodal agency can be given a defined

service fee for subsidy management.

c. The MNRE can focus on policy design, defining guidelines and facilitating

resolution of key SHP sector issues. The schemes for resource assessment &

identification of new sites, Renovation & Modernization, Research &

Development, and Human Resource Development can be directly managed by

MNRE.

d. The capital subsidy can be disbursed under three tranches to support setting

up new SHP projects is:

i. First Installment: Disbursement of 50% capital subsidy on

disbursement of 50% of term loan & achievement of 50% progress on

the project.

ii. Second installment: Disbursement of 30% on successful completion of

the project, fulfillment of performance guarantee tests/ testing &

certification of performance, physical inspection of the project and the

commencement of commercial generation.

iii. Third installment: Disbursement of 20% when project attains 80% of

the quantum of generation for the corresponding months as envisaged

in the DPR for a minimum of three consecutive months or 80% annual

cumulative generation whichever is applicable.

iv. The total financial support, for project set-up by the developer fully

through its own resources, will be released directly after successful

commissioning of the project :

1. First installment: Disbursement of 80% on successful

completion of the project, fulfillment of performance guarantee

tests/ testing & certification of performance, physical inspection

of the project and the commencement of commercial

generation.

2. Second installment: Disbursement of 20% when project attains

80% of the quantum of generation for the corresponding

months as envisaged in the DPR for a minimum of three

consecutive months or 80% annual cumulative generation

whichever is applicable.

e. Eligibility Criteria

i. The request on application form along with documentary proof, for the

grant of financial support for SHP project, complete in all respect from


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the developer should be submitted to the Nodal Agency within six

months from the achievement of financial closure of the SHP project.

ii. The SHP project shall achieve the COD within a defined time limit (say

4/5 years) from the date of achievement of financial closure. In case of

failure of SHP project to achieve COD within the defined time limit, the

project shall become ineligible for capital subsidy.

iii. In case the SHP project is set-up by the developer fully through its

own resources, the SHP project shall achieve the COD within a defined

time limit (say 4/5 years) from the date of signing of implementation

agreement with the State Govt./Agency. In case of failure of SHP

project to achieve COD within the defined time limit, the project shall

become ineligible for subsidy.

f. Extension limits under scheme :

i. Grace Period: a grace period of 12 months can be provided ONLY in

case the project suffers due to natural calamities which results in

delays during execution of project.

4. MNRE can consider providing separate incentive for State agencies to encourage

timely commissioning of SHP projects. MNRE, with assistance from AHEC, can a fix

maximum time limit for commissioning a specific project after signing of

implementation agreement for eligibility of incentive. Incentive to be disbursed as

INR per MW and disbursed to State agency (SNA/Utility) after commissioning of SHP

capacity.

5. Institutional Strengthening

a. MNRE can develop a web tool/application to provide a single point integrated

platform to support SHP development across states. The tool/application shall

provide clarity on checklist and data inputs required from developers, status

of application, and instructions/alert to state agencies (SNA, Utilities, other

State & central agencies as applicable) on action required & processing,

output reports & additional information to support installation.

b. The web tool development can be funded by MNRE and adequate training &

capacity building can be provided to State agencies, SHP developer

associations, AHEC etc. For initial one year of implementation, MNRE can

support an IT cell to facilitate streamlining of the IT application roll-out. From

a sustainability perspective, MNRE can evaluate a government institution to be

responsible for maintaining and upgrading the IT tool/application.

6. Support for Water mills

a. MNRE to continue providing financial support under water mills scheme.

b. MNRE to explore better watermill runner designs which can operate efficiently

under low and variable flow conditions.

c. Training centers across different regions shall be identified in each state to

facilitate ongoing initiatives for spreading awareness and implementation of

watermill programs.

d. Encourage development of better revenue models for water mills scheme in

consultation with State agencies like net metering which can help watermill

owners create savings from surplus electricity post consumption. This can also

incentivize traditional watermill owners to upgrade to electric watermills or

install a hybrid system.

7. Support for setting up of Micro hydel projects upto 100 kW capacity


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a. MNRE to continue providing financial support for micro hydel project upto 100

kW capacity

b. MNRE should give priority to rural/remote areas, especially off-grid and mini-

grid for encouraging implementation of micro hydel project upto 100 kW

capacity.

8. Resource Assessment

a. MNRE should strengthen database for resource assessment/hydrological data.

For this MNRE should reassess/evaluate the small hydro potential in the

country on regular basis (every 3 years).

b. MNRE should to create a credible online databank for hydrological data.

c. MNRE to undertake study with objective that SHP potential spread across

different regions is categorized from the perspective of its ease of harnessing

– this can be done by defining the attractiveness of potential based on:

nearest power evacuation infrastructure, access road, water availability, forest

land etc. The categorization shall result in ranking the SHP sites based on

their attractiveness.

d. MNRE to take initiative to standardize the DPR preparation process and

enhance quality of DPRs. Online tool proposed to be developed by MNRE can

be used for standardization of DPR preparation and having appropriate checks

& balances to check quality of DPR.

9. R&D and Human Resource Development

a. MNRE should develop network of Regional Centres of Excellence to support

development of SHP. At least, one institution in each region should be

identified to spearhead the R&D and training initiatives, with AHEC providing

the guiding framework.

b. MNRE through AHEC to prepare e-learning training platform with focus on

areas like DPR preparation, construction & installation, O&M, technical

standards etc. Specialized courses for technicians can be taken up to meet the

requirement of skilled manpower for field installations and O&M.

c. Online certification courses can be developed by AHEC.

d. MNRE to explore potential of providing access to e-learning modules to other

countries to enhance partnership in SHP segment.

e. MNRE to undertake a detailed study and consultations to identify the thematic

areas for R&D and training capacity building. MNRE should prepare a detailed

roadmap for undertaking activities in the next 3 years.

10. Regulatory Interventions

a. National Tariff Policy (amendment) has provided waiver in inter-state

transmission charges and energy losses for transmission of Solar and Wind

Power. SHP projects are reliable RE source and encouraging inter-state trade

shall assist SHP developers. It is proposed that MNRE should initiate review of

the same to provide similar benefit to SHP projects.

b. Capital cost considered by a number of SERCs is lower than CERC values. It is

important to ensure regulatory push to consider the cost variations while

determining tariff for SHP projects.


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1 Introduction

1.1 SHP in India

The Ministry of New and Renewable Energy (MNRE) has been entrusted with the overall

responsibility of development of small hydro sector in India. Small Hydro Power (SHP)

projects are classified into different categories as per installed capacity. The following

table provides details of the SHP projects classification.

Table 1: SHP Projects classification in India

Grid connection mode Category of projects Installed capacity limits

Grid Connected Micro Hydro Projects Up to 100 kW

Mini Hydro Projects 101 kW to 2,000 kW

Small Hydro Projects 2,001 KW to 25,000 kW

Off-Grid Mode Micro hydel projects

(MHP) – Off grid mode

Up to 100 kW (as per MNRE

subsidy scheme for SHP)

Water Mills (WM) – Off

grid modes (mechanical /

electrical output)

Up to 5 kW (as per MNRE

subsidy scheme for SHP)

1.2 Key objective of the assignment

MNRE has been implementing the SHP Program and under this program, around 600

SHP projects (public and private) have been supported by the ministry.

The Ministry is now in the process of evolving the program/ scheme for the next five

year period. It would like to evaluate the current status of the SHP Program and

schemes for their effectiveness in achieving the stated objectives during the 12th Plan

period and make appropriate changes for the roll out during the next five year period.

This assignment was undertaken to undertake evaluation of MNRE programme / scheme

implementation during 12th Five Year Plan period and propose changes in the design for

SHP Program. This included primary surveys of the SHP projects across states which are

under implementation/ completed.

The overall objective is to provide recommendations pertaining to changes in existing

models, redesign policy and programme evaluation measures for MNRE SHP programme

with a short term and long term perspective.


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2 Small Hydro Power sector in India

2.1 SHP Capacity development

With energy security and climate change concerns taking center stage in the policy arena,

Renewable Energy (RE) has become an important part of the energy sector initiatives in

India. To this effect the government has set aggressive targets and has put in place several

incentives and policy initiatives (for both grid connected and off-grid).

The installed capacity mix for electricity generation has undergone significant change in

recent years, with the share of RE capacity reaching 18% by March 2017. Growth of

renewable energy across different technologies is given in the figure below:

Figure 1 : RE Capacity addition trend

Source: CEA/MNRE

It can be observed that growth of renewable energy technologies has been exponential

mainly led by two technologies viz solar and wind power. Wind energy continues have

higher rate of capacity installation within RE sources.

The current progress of the RE target is as below:

Table 2: Achievement status of RE projects

Source: MNRE

The Govt. of India targets achieving 175 GW by the year 2022. The target comprises of

100 GW of solar power, 60 GW of wind power, 10 GW of biomass power, and 5 GW of

small hydro power (SHP).

0

10000

20000

30000

40000

50000

60000

FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Insta

lled C

apacity (

MW

)

YearWind Solar Bio- Mass WTE SHP

Sr. No. RE technology Cumulative Achievement in MW

(as on 31.03.2017)

1 Grid Interactive Solar Power 12,288

2 Grid Interactive Wind Power 32,279

3 Bio Power 8,181

4 Waste to Power 114

5 Small Hydro Power 4,379

Total 57,244


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The capacity additions for the small hydro power sector has grown at a CAGR of 9%

since FY 2008. However, the growth has slowed down over the last few years as shown

in the graph below. The main reason for slow progress is the lack of private sector

participation in SHP projects, developing on difficult terrain in hilly areas, involvement of

private and forest land in the SHP boundary, inability to fix a proper boundary by project

developers for SHP projects, allotment and obtaining statuary clearances for

establishment of SHP projects among others.

Figure 2: SHP annual capacity additions

Source: MNRE Annual Reports, CEA Report

2.2 SHP Potential in India

The potential of the small hydro projects in India as per MNRE data (as on June 2016) is

estimated at 21,135.37 MW. This potential is large enough to meet the local demand

both in the form of electrical power as well thorough mechanical outputs (Water Mills,

etc) in remote areas.

State wise distribution of SHP potential is listed as per table below.

Table 3: Summary of Total Potential SHP Project capacities across States

S No.

State/ UT

Run of River Dam Based Canal Based Total

No. MW No. MW No. MW No. MW

1 Andhra Pradesh

1 0.2 15 88.95 437 422.51 453 511.57

2 Arunachal Pradesh

800 2064.91 0 0 0 0 800 2064.92

3 Assam 103 196.99 0 0 3 5 106 201.99

4 Bihar 2 0.42 5 7.5 132 519.06 139 526.98

5 Chhattisgarh 130 892.91 36 89.72 33 115.57 199 1098.2

6 Goa 0 0 7 4.7 0 0 7 4.7

7 Gujarat 21 42.55 3 18 268 141.42 292 201.97


17

S No.

State/ UT

Run of River Dam Based Canal Based Total

No. MW No. MW No. MW No. MW

8 Haryana 0 0 0 0 33 107.4 33 107.4

9 Himachal Pradesh

1049 3,460.34 0 0 0 0 1049 3460.34

10 Jammu & Kashmir

302 1707.45 0 0 0 0 302 1707.45

11 Jharkhand 76 89.2 1 1 44 137.76 121 227.96

12 Karnataka 387 2,667.41 17 122.5 214 936.59 618 3726.49

13 Kerala 209 431.42 17 152.13 12 63.6 238 647.15

14 Madhya Pradesh

112 302.53 109 405.2 78 112.72 299 820.44

15 Maharashtra 94 252.02 44 277.43 132 257.01 270 786.46

16 Manipur 110 99.95 0 0 0 0 110 99.95

17 Meghalaya 97 230.05 0 0 0 0 97 230.05

18 Mizoram 71 160.9 1 8 0 0 72 168.9

19 Nagaland 92 115.18 6 67 0 0 98 182.18

20 Orissa 63 84.54 9 36.31 148 165.37 220 286.22

21 Punjab 38 56.9 11 0.51 326 520.87 375 578.28

22 Rajasthan 0 0 9 4.87 55 46.8 64 51.67

23 Sikkim 88 266.64 0 0 0 0 88 266.64

24 Tamil Nadu 101 438.9 37 125 53 40.56 191 604.46

25 Tripura 6 38.01 2 5.5 5 3.35 13 46.86

26 Andaman & Nicobar

Islands (UT)

7 7.27 0 0 0 0 7 7.27

27 Uttar Pradesh 2 3.05 30 142.23 220 316.97 251 460.75

28 Uttarakhand 434 1,655.31 0 0 8 9.01 442 1664.31

29 West Bengal 95 272.04 5 1.62 79 118.41 179 393.81

TOTAL 4,490 15,537.07 364 1,558.16 2281 4,040.14 7135 21,135.37

Source: MNRE Data

The following 6 states having SHP potential of more than 1 GW contributes close to 65%

of the total SHP potential in the country.

Arunachal Pradesh

Chhattisgarh

Himachal Pradesh

Jammu and Kashmir

Karnataka


18

Uttarakhand

The potential of Run of River (ROR), Dam based (DB) and Canal Based (CB) type of

projects are distributed across geographies with most ROR is in Northern / NE region of

hilly areas while Dam based and canal based projects potential in the Southern / other

States (Punjab etc.) having relatively flat terrain in India.

2.3 Key drivers for SHP projects in India

One of the important drivers for SHP project development has been the support of MNRE

incentives for developing SHP projects. SHP is also a part of the 175 GW RE target set up

by MNRE for the year 2022. Various states also provide incentives to developers of SHP

as such projects benefit local communities through access to electricity and livelihood

generation.

Historically development of SHP in

India has been also supported by

international organizations such

as the World Bank. States also

encourage SHP as a part of their

renewable purchase obligation

targets. Government provides

various incentives to developers

such as tax holidays, duty

exemptions, and facilitation for

creation of evacuation

infrastructure.

The small hydro sector

development has been influenced

by a number of events or

initiatives of policy makers and development institutions. This following summarizes

these initiatives and events:

The UNDP GEF Programme for Small Hydro – The UNDP-GEF Indian Hilly Hydro

Project was launched in 1994 with the objective of developing a national strategy and

master plan for optimum utilization of small hydro resources of Himalayan and sub

Himalayan region. The project was aimed at developing 20 demonstration projects

including management and ownership structure models for these plants. The project

was successful in developing and promoting the concept of community participation

and management of SHP and watermills for rural electrification. Another end result of

the project was the development of a firm programme for small hydro promotion in

India.

The MNRE Renewable Energy Tariff – The MNRE, as a precursor to the Feed in Tariffs

being offered by the various State Electricity Regulatory Commissions (SERC’s)

today, had offered a tariff of Rs 2.25 per unit in 1993-94. This tariff had a 5%

escalation factor for the first five years and was valid for period of 20 years. The

presence of this tariff allowed a number of private sector developers to set up their

own small hydro power plants in the absence of a large tax incentive or a huge

subsidy programme.

Electricity Act 2003 and consequent changes in industry structure – The Electricity

Act, 2003, which came into force on 10 June 2003, brought about wide-ranging

changes to the structure and operation of the industry. Generation was liberalised

and the techno-economic clearance of CEA was no longer mandatory except for

hydro generating schemes with very high capital expenditure. The introduction of

Open Access, provisions for trading and power market development altered the

feasibility of generation capacity addition from a wide variety of sources in the

country including small and large hydro.


19

State Hydro Policies – A number of states (such as Himachal Pradesh and

Uttarakhand) devised their own hydro promotion policies, specifically to encourage

private participation in the sector, in line with recommendations in the National

Electricity Policy. In these policies, these states introduced centralized procedures for

land acquisition and other approvals/clearances for speedy implementation of

hydroelectric projects. Till now States namely, HP, Uttarakhand, Uttar Pradesh,

Punjab, Haryana, Madhya Pradesh, Karnataka, Kerala, Andhra Pradesh, Tamil Nadu,

Orissa, West Bengal, Maharashtra and Rajasthan etc. have announced policies for

setting up commercial SHP projects through private sector participation. The facilities

covered under these policies by the states include wheeling of power produced,

banking, attractive buy-back rates, facility for third party sale, etc.

The World Banks 2nd Line of Credit (LoC) – The World Bank provided IREDA, a LoC of

US $ 135 million for the implementation of India: Second Renewable Energy Project.

The broad objectives of this LoC was to increase power supply through investments

in Small Hydro Project (SHP) schemes and mobilize private sector investments in

renewable energy especially small hydro. This LoC supported 45 projects; out of

which more than 35 projects had been commissioned till March 2008. The 2nd LoC

was responsible for facilitating the entry of a number of players into the small hydro

sector. The 2nd LoC also allowed IREDA to provide concessional financing towards the

small hydro sector which in turn allowed the sector to reach a certain amount of

critical mass.

Feed in Tariffs for Small Hydro – A Preferential Tariff / Feed-in Tariff is an instrument

used to encourage the adoption of renewable energy through government legislation

by the electricity utilities. A FIT obligates these utilities to buy renewable electricity at

rates which are guaranteed over a certain period of time and vary with technology

and level of market development. Most of the states have now issued tariff orders

detailing a feed in tariff for small hydro. Feed in tariffs are crucial for the small hydro

sectors development as no other incentive (except CDM financing) is available for

small hydro projects.

However, recent step of MNRE in releasing a competitive based bidding process (draft)

for the SHP projects is a step towards creating enabling market conditions for sector

growth. It is customary to evaluate the options at times to ensure that such measures

will lead to success of the SHP proliferation uniformly across sectors in the Country on a

large scale.

2.3.1 Value Chain in SHP

As per MNRE, the manufacturing capacity for SHP in India is close to 400 MWs1 per year.

About 27 manufacturers are equipped which can supply the full range of SHP equipment

are registered with MNRE. Manufacturing capacity in India is also directed towards

exports, with most European companies in small hydro technology also present in India.

There is a focus on turbine technology which can cater to geographies with low head

such as canals, fall structures, dam outlets, and small streams.

New technology such as permanent magnet generator which can manage variability of

discharge in streams has become available along with improvements in control system

for SHP. Considering that the potential for growth in small hydro is also high at a global

level, policy measures can be implemented which enables SHP turbine manufacturing in

India to also aim for export opportunities.

1 MNRE


20

2.4 Key issues in small hydro Sector

Issues such as construction in difficult terrains, land availability, power evacuation, tariff

levels, financing, and lack of hydrological data can be considered as central to the SHP

sector today. The details of these issues are described in below sub sections.

2.4.1 Pre-Construction

Resource assessment / lack of hydrological data: There is a lack of reliable

hydrological data required for assessing financial and technical feasibility of SHP

projects in the various regions of India. Data which can provide information on the

intermittent flow of water is vital for estimation of energy generation / CUF of the

potential SHP project site.

Inaccurate or inadequate data leads to faulty design parameters and may result in

financial losses over a lifetime of project;

Various approvals and clearances such as techno-economic clearance, land allotment

approval, Forest clearance, and Water rights by State irrigation departments, NOC

from Fisheries and State Pollution Control Board (SPCB) have been reported to have

lengthy timelines and procedures vary from State to State.

2.4.2 Construction

Remote location in hilly and mountainous regions pose several infrastructural

constraints, which increases the risks related to timelines in setting up SHP projects.

The hurdles due to locations further prolong the time lines required to set up SHP

projects when compared to other RE projects.

These hurdles also increase the risk of cost overruns.

2.4.3 Land availability

Land acquisition has been a cause of delay.

States have also give low priority to SHP due to higher focus on large scale power

plants.

High costs of land for SHP development is an issue.

Developers have to face delays in land acquisition or petition district administration

or negotiate to bring the cost of the land down.

2.4.4 Power evacuation


evacuation infrastructure.






time consuming

Lack of guarantee from transmission companies for performance of evacuation

infrastructure


SHP developers have to incur substantial cost for evacuation of power generated

from the renewable energy based projects.

2.4.5 Tariff

States across India have a varying tariff structure and given the unique nature and

risks involved for each SHP project developer, tariff levels are generally insufficient to


21

attract investments. The SERC benchmark tariffs are much lower when compared to

CERC determined SHP tariffs.

2.4.6 Financing

The risks associated with SHP project results in an increase in the cost of borrowing

for developers. This makes SHP projects unattractive when compared to other RE

technologies.

2.4.7 Operational Issues

Old Turbines running at low load factor: Efforts of the Government is to develop new

technology and engineering solutions such as low head turbines to set up low / ultralow

head (below 3 m) SHP projects.

High silting issues in certain river basins results in high level of O&M cost for developers.


22

3 SHP Policy & Regulatory Review

3.1 National level Policy review

The Government of India has set a target of 5 GW of SHP installation by year 2022.

Perennial or intermittent flow of natural water streams in hilly areas of India as well

canals and other types of small flow capacity streams from dam outlets provides

excellent opportunity for Small Hydro Projects to tap this untouched potential to meet

the demand of local communities residing in hilly and remote areas.

SHP is considered to be a very effective way of power generation for these rural far flung

areas and have potential to transform the livelihood and economic opportunities at local

level across geographies in the Country. Considering the need of the remote and rural

areas economic / livelihood remote electrification, Government (MNRE) is aiming towards

generating competitively priced Small Hydro Power (SHP).

Ministry of New & Renewable Energy (MNRE) is providing policy support in the form of

capital subsidy, central financial assistance & other initiatives for the SHP sector. One of

the aims of promotion of Small Hydro Power of the Government of India and State

Governments is to enrich socio-economic status of remote and rural areas in power

generation.

The types of financial incentives principally are divided into incentives for grid connected

and off grid respectively. Some of the highlights of MNRE schemes under various

categories are indicated below.

Table 4: MNRE Incentive Schemes for SHP2

S No Category of

Subsidy


1 Resource

assessment

Scheme to support site

identification, preparation of

DPR, site surveys,

investigations etc.

INR 6 Lakh for up to 1 MW

station capacity

INR 10 Lakh for more than

1 MW and up to 25 station

capacity

2 Private sector

setting up

SHP projects

New SHP projects in private

/ cooperative, Joint sector

etc.

Special Category States

(NE, HP, Uttarakhand &

J&K): INR 1.5 Crore per MW

Other States: INR 1 Crore

per MW

Limited up to INR 5 Crore

per project for both

categories

Capacity limits- Above 0.1

MW and upto 25 MW

3 Government

Sector SHP

New SHP projects in

Government Sector

Category of projects –

above 100 KW & upto 1 MW



J&K): - INR 75,000 per kW

Other States: INR 35,000

per kW

Category of projects -

above 1 MW & up to 25 MW

2 MNRE SHP Programme, subsidy scheme for SHP


23

S No Category of

Subsidy




J&K): INR 7.5 Crore per MW

Other States: INR 3.5 Crore

per MW

Limited CFA up to INR 20

Crore per project for both

categories

4 Renovation Renovation and

modernization of existing

SHP Projects in Government

Sector

All States and UTs

Up to 1,000 KW: INR

10,000 per kW

Above 1 MW & upto 25 MW:

INR 1 Crore per MW limited

to INR 10 Crore per project

5 Water Mills

(WM) &

Micro Hydel

Projects

(MHP)

Support for development /

modernization of Water mills

(Mechanical / electrical

output) and setting up MHP

projects up to 100 kW

Mechanical Output only:

INR 50,000 per Watermill

Electrical output or

combined mechanical/

electrical output – INR

1,50,000 per Watermill

Maximum size of Watermill

for availing benefit – 5 kW

For MHP project upto 100

kW capacity – INR 1,25,000

per kW

6 Research &

Development

Financial support for

Research & Development

and Capacity Building

Upto 100% of the activity

cost for capacity building on

case to case basis


24

4 Analysis - Key findings from Project

Survey & Review

4.1 Approach for Survey

As per the scope of work of this assignment, the overall impact of the SHP scheme was

assessed through direct data collection from the field visits and conducting consultations

with key stakeholders like the project developers, nodal agencies, etc. The scope

required undertaking sample for the proposed 50 field visits covering small hydro as well

as water mills. Based on discussion with MNRE, the following states were shortlisted for

undertaking the survey:

8. Arunachal Pradesh

9. Uttarakhand

10. Karnataka

11. Himachal Pradesh

12. Andhra Pradesh

13. Punjab

14. Kerala

The objective was to have geographical coverage and cover different types of SHP sites.

The summary of sites (SHP & water mill) covered across different States is detailed in

the figure below:

Figure 3 : Geographic spread of field visits

For undertaking the survey, a structured questionnaire and formats were prepared for

the collection of data from various stakeholders. The templates were discussed with

MNRE to ensure the coverage and to draw clear outcomes from the field visits. The list

of projects covered under field survey is detailed in Annexure 1.


25

The site survey was completed across the shortlisted states and this section highlights

the key findings of the survey covering technical, commercial, financial, policy, training &

capacity building, R&D etc. related aspects. The objective is to highlight the learnings

which will provide guidance on identifying the key support areas required under the

MNRE scheme.

The summary of key findings is detailed below.

4.2 Technical Analysis

4.2.1 Power Evacuation

Development of adequate power evacuation infrastructure especially for SHP’s - One of

the most crucial issues/ barriers in the up-scaling of small hydro is interconnection

between the plant and the nearest grid substation. In a number of cases it has been

seen that SHP plants are situated in locations far away from the grid. Therefore

providing grid extension up to the SHP plants to off-take the power puts additional

financial burden either on the licensee or the developer and in cases where funds for

development of such infrastructure us limited, this impedes the process of hydro

development in the region and state.

Essentially evacuation infrastructure availability is among major issues faced by SHP

projects due to the following reasons:


evacuation infrastructure.






time consuming

Evacuation transmission infrastructure development is delayed due to lack of efficient

engagement procedures with local communities

Lack of guarantee from transmission companies/ discoms for performance of

evacuation infrastructure


Based on the survey feedback, the critical Factors that need addressing for evacuation

are indicated below:

Lack of adequate transmission capacity – Lack of adequate transmission capacity is a

generic issue across the Northern and North Eastern states ranging from HP,

Uttarakhand and Arunachal Pradesh.

In case of Himachal Pradesh, areas such as Kullu, Lahaul & Spiti, Kinnaur,

Pangi and Chamba Valley are currently facing evacuation problems with the

rest of the state having adequate capacity for the moment. This lack of

adequate evacuation infrastructure has impacted the development plans of a

number of developers.

In the North East, the problem of lack of adequate evacuation infrastructure is

very acute. Developers have to lay transmission infrastructure for long

distance, which increases the land cost.


26

Lack of adequate and optimal planning for future SHP potential: Transmission

planning undertaken usually with only large hydro projects in mind and as a result

small and medium hydro projects suffer. The main reason for this is that no state

level plans were available for the development of adequate evacuation infrastructure,

especially integrated plan for developing RE potential in the state including with a

focus on SHP. With development of resources in a specific region, SHPs face issues

with congestion since region’s transmission capacity does not keep pace with SHP

installations.

Lack of synergy between project site allocations and transmission development:

Limited consultation or planning takes place between the state transmission company

and the State Nodal or Development Agency for sites that are in the process of

development or are likely to be bid out in the near future. Often lack of adequate

evacuation infrastructure or delays in evacuation infrastructure development forces a

number of players to delay their projects. There is a need to bid out new sites based

on a joint plan between the State Nodal Agency and the state transmission company.

Site allocation independent of state transmission plan – focus on self-identification of

sites can at times further complicate matters.

Delay in Transmission Projects – Delay in transmission plans due to factors such as

lack of funds with the State Transmission Utilities (STU) can also impact SHP

development. A number of agencies also face delays in obtaining clearances from

forest authorities for development of evacuation infrastructure.

Evacuation Infrastructure might be an issue for self-identified projects - If the project

is a developer identified project and is located in an area where the evacuation

infrastructure is either not available or is inadequate, it would become an issue for

the state transmission company to provide this infrastructure, especially for a small

hydro project. In case of state allocated projects, the state agencies can consult and

allot projects keeping in mind the present and future evacuation infrastructure

development.

Some of the examples related to power evacuation in Himachal Pradesh are

below:

Substation and the grid has not been strengthened to accommodate new capacity which

results in overloading and curtailment of generation. Sai Engineering Foundation (TOSS

SHP) - grid outages results in lower PLF (40%) – no compensation framework

Kapil Mohan & Associates (Beas Kund & Jirah SHP) mentioned that the substation

charges are to be paid extra however there is no commitment of availability.

Non-availability of power evacuation resulted in COD delay by 1 year (Baragaon 24 MW

SHP – Kullu).

Heavy snowfall results in breakage of transmission lines resulting in power evacuation –

at times 2-3 months in a year (not regular)

Generation Back Down and Line Loading During Peak Season

SHP connected to Low voltage levels 11 kV are facing issues of generation back

downs from DISCOMs during low demand in near by areas.

Power evacuation line loading issues has been observed in beas kund, Jirah and

Aleo II projects in Himachal Pradesh (back-down upto 10%)

Binva IV developers states that in peak season such as December and January,

plant has to shutdown for 1-2 hours daily due to low production and high

demand resulting in voltage issues


27

Arunachal Pradesh

Due to lack of appropriate grid infrastructure across the state, most SHP power

plants function in isolation mode. Frequency fluctuations are also very high. Both

these factors results in high wear and tear of machines.

Grid breakdown is very frequent due to issues related to terrain and weather

The figure below provides an overview of typical distance of SHP projects to the nearest

sub-station as well as key evacuation issues faced by developers.

Figure 4 : Power Evacuation issues

Some of the examples related to power evacuation in Uttarakhand are below:

Heavy snowfall results in breakage of transmission lines resulting in power

evacuation issue for continuous 1-2 months in a year (not regular)

Issue of power evacuation is more prevalent in Garhwal range projects (Gangani

and Badyar) in Uttarkashi belt

Regulator does not charge for line capacity usage proportionately. Bhilangana III

SHP developers stated that regulator is charging the full line capacity charges

incurred for setup from them since other plants which are planned in the valley

have not come up yet.


28

4.2.2 Resource assessment

Available flow is the major input parameter, besides hydraulic head, that is responsible

for the amount of energy that can be produced by a SHP. It is determined through a

hydrological study that considers flow measurements, catchment area, precipitation, and

flow distribution during the year. Statistical analysis of the hydrology of potential sites

requires sufficient period of flow monitoring or precipitation monitoring.

Development of SHP requires having good hydrological data and promotion of initiatives

to support the same. MNRE has a dedicated scheme “FINANCIAL SUPPORT FOR

IDENTIFICATION OF NEW POTENTIAL SHP SITES AND PREPARATION OF PLAN AND

PREPARATION OF DPR”. Some of the key features of the scheme are:

The Ministry will provide financial support for the overall estimation of potential of

SHP projects in a State, identification of new potential SHP sites and for the

preparation of Plan for systematic SHP development including environment impact

assessment etc., in the State. The Ministry would also support specialized studies for

remote / border areas to prepare plans for setting up Micro Hydel Projects (MHPs) in

such areas and strengthening of data base for potential SHP sites. These studies will

be supported on case to case basis.

The financial support of ' 6.00 lakh for each project upto 1.00 MW capacity and 10.00

lakhs for each project with more than 1.00 MW & upto 25 MW capacity to the

State Govt. dept./agencies/local bodies will be provided for preparation of Detailed

Project Report (DPR) including detailed survey & investigation (DSI), or actual cost

incurred in this regard, whichever is less.

The DPRs for run-off-river projects are required to actually carry out all types of

detailed investigation studies at the project sites including collection of daily

discharge data for a period of 18 months inclusive of a minimum period of two lean

seasons, after submission of proposal including pre-feasibility report to the Ministry.

However, in case the project sites are located at irrigation canals, dam toe etc. where

the discharge is generally being measured by the Irrigation or other Govt.

organizations on regular basis, the implementing agencies may use the available

discharge data of two lean seasons which should have been collected within the

preceding five years, in preparation of DPR. Actual measurement of discharge data is

exempted in these cases, if not required.

DPR shall have provision of release of State Government specified mandatory

Environment Flow (minimum flow) throughout the year. In the States where such

recommended value does not exist, 15% of average flow of three (3) lean months

shall be released at the diversion part as Environment Flow (minimum flow).

A number of developers have highlighted regarding the importance of hydrological data

and in certain cases it has been pointed that the hydrological data has changed over the

years. Irregular perennial or intermittent flow of water data is a vital information for

estimation of energy generation / CUF of the potential SHP project site. Inaccurate or

inadequate data leads to faulty design parameters and may result in financial losses at a

later stage of the project.

Some of the inputs regarding this issue is indicated in table below:

Table 5 : Resource assessment issues

State Description of issue

Himachal

Pradesh • Baragaon SHP project (24 MW) has observed with a

hydrological changes impacting water availability


29


Uttarakhand

• Actual output variation from the approved DPR due to limited

data on resource assessment

• Sarju 3 developers indicated absence of standard guidelines for

investigation of resource

• Bhilangana III (UT) developers stated that such deviations

which are out of the control of developers should be considered

in the Tariff since revenue is directly linked to such variations.

Kerala

• Iruttukanam(Kerala) project developer indicated that their

generation goes down to 19 MUs during a poor monsoon from

24.8 MUs which is an average annual generation. Resource

variability needs to be captured appropriately.

It has been emphasized that hydrological data is not upto mark and impacts the viability

of the project. Also, it’s pointed out that State agencies need capacity building to have

the requisite capability to provide credible data. Limited credible data bank is available

for developers.

From MNRE perspective, the identification of new potential sites is an ongoing

process and with a view to induct efficient and new technologies.

It is important that MNRE initiate the process to reassess/evaluate the hydro

potential in the country to harness the hydro potential, clearly detailing low head

and ultra-low head sites including existing SHP Projects.

Development of credible hydrology database will assist developers.

State agencies to prepare a plan for undertaking re-assessment of SHP potential.

MNRE and State agencies can evaluate adopting cluster based potential

assessment.

Change in hydrology is a risk faced by developers. It is important that MNRE to

evaluate this issue mainly from the perspective of already installed SHPs and

develop an approach to quantify the financial impact on developers &

methodology to adjust it under regulatory framework. This can be discussed with

SERCs to evaluate inclusion of specific provisions in SHP PPAs to mitigate risk

related to change in hydrology.

Limited awareness of first time developers for significance of a quality DPR &

good potential assessment has been an issue. In a number of cases, the

developers have indicated increase in cost during construction due to poor quality

of DPR. Also, lack of awareness towards standard operating process for

preparation of DPRs limits their ability.

4.2.3 Availability of Water

Available flow is of utmost importance for site selection of SHP project. The amount of

water and its annual distribution affects SHP project viability. When selecting a site and

estimating energy generation, it is crucial to consider hydrological flow and other factors

that may impact flow available for generation, including minimum flow (a combination of

environmental and social requirements, such as ecological requirements, irrigation usage

and water supply), leakage, and evaporation.

During the stakeholder interaction, water availability as a constraint was highlighted by

developers in Punjab & Karnataka.


30

Table 6 : Water Availability issues


Punjab

Water availability in Canal: Select canal projects on Abhor

Bhatinda Branch canal projects are suffering from contracted

capacity of available water in the canal since during high demand

seasons water availability for the SHP is only 50-60% of the rated

capacity.

Head design : SHP Projects have been identified with operating

at lesser output as compared to rated due to unavailability of

head in actual operation as compared to DPR values

Impact of Agriculture pattern : SHP Project outputs varies to

a great extent on the cropping pattern (wheat, sugarcane, paddy

etc)

Karnataka

Aramedanhalli MHS has not generated any electricity due to lack

of sufficient availability of water in the canal in the last two years.

This has adversely affected the profitability of the project. Some

form of capacity availability fixed tariff would have helped.

It is important that these factors are considered while preparing the DPR of the SHP

projects.

4.2.4 O&M cost of SHP projects

Experience of running hydropower station reveals that even after detailed project

planning/quality control measures taken at various stages from inception to

commissioning, several unforeseen problems do take place during the operation and

maintenance resulting in forced outages/low generation and load shedding etc. causing

economic loss. Given the nature of a SHP project, there is a significant amount of

customization that feeds into design, manufacturing, erection, commissioning, and O&M.

The equipment some time cannot be fully assembled or tested at Manufacturer’s Shop.

Maintenance exercise at predetermined time interval is therefore, planned to ensure the

following objectives are met:

i) Quality and reliable operation of equipment on long term basis through identified

periodic inspection/checking of components and subsequent replacement

/rectification of worn out/defective parts, wherever required.

ii) Maximum availability of equipment with least number of shut downs by ensuring

that the rate of deterioration of any component does not exceed the life

expectancy of the equipment at any stage. Periodic/planned shut downs should

be arranged to avoid long term forced outages.

iii) Eradication /non-repetition of operational problems by timely analysis of the

cause of faults/problems and replacement of short term solutions by long lasting

and permanent ones.

The O&M cost for SHP project is an important element of the tariff analysis and from the

below table it can be seen that the O&M cost for SHP projects have increase over the

years.


31

Table 7 : O&M Cost benchmark - CERC

Project

Size

O&M Cost

FY 2012-13

(Rs

lakhs/MW)

O&M Cost

FY 2016-17

(Rs

lakhs/MW)

O&M Cost

FY 2017 -

18

(Rs

lakhs/MW

Himachal Pradesh,

Uttarakhand, WB

& North-Eastern

States

Below 5 MW 25 31 36

5 MW to 25

MW 18 22 27

Other States

Below 5 MW 20 24 29

5 MW to 25

MW 14 17 21

Source: CERC

The inputs from survey indicates that the O&M cost varies across regions and depending

on river basis, some projects may have to incur higher O&M cost due to high silting in

the river. Some of the inputs collected from survey are summarized in the table below.

Table 8 : O&M issues


Himachal

Pradesh • Many projects from parts of Toss river basin are found to have

issues of silting causing damage of the turbine blades / unit

Uttarakhand • Projects from parts of Saryu river basin are found to have

issues of silting

Punjab • SHP projects have been identified with huge operation cost 5-

6% of the total capital due to high maintenance requirements

in turbine bearing

Arunachal

Pradesh

• High maintenance cost due to uses of frequent landslides near

the forebay area.

• Frequent breakdown of machines due to functioning in

isolation mode.

• Spare parts for replacement are unavailable in Arunachal and

have to be imported from outside the state which raises cost

and time.

• Accessibility to remote sites is poor which also leads to high

cost and time overruns.

4.2.5 Geological Surprises have impacted projects

The geological situation at a potential SHP site is of crucial importance for power plant

construction and operation. Costs can rise substantially depending on site geological

conditions. First, the foundations of all SHP structures must be adapted to existing

geological conditions, especially those of the powerhouse.

Geological surprises impact development of SHP projects and also result in delay of

project commissioning, as noted in a number of cases.

A number of projects have faced geological surprises:

Sarju 2 (UT) developers faced several geological surprises during tunneling in their

project.


32

limited expertise to undertake proper geological investigation an issue

Similar experience regarding low design expertise was communicated by

project developers of Dikleri.

Assessment also needs to include impacts due to possible natural calamities.

One of the projects situated in Loharkhet of Bageshwar district (UT) has incurred

heavy loss due to flooding in last two years, complete head race pipe works is

damaged and reconstructed.

In Arunachal Pradesh, landslides are a major source of risk during and post

implementation of the project.

Despite detailed assessment, project development in the Himalayan Region is prone to

geological surprises during construction. This can at times cause delay and add to

estimated project cost. It is necessary to ensure that commercial agreements, such as

the Project Implementation Agreement, signed with the State Government recognize

such surprises and provide for consequent extension of Commercial Operation Date in

case such surprises emerge during the construction period.

4.3 Policy framework

Ministry of New & Renewable Energy has been entrusted with the responsibility of

developing small, micro and mini hydro power upto 25 MW capacity. Water being a

subject in the State List gives the States a decisive say in matters of small hydro power

projects. As the State Governments do not involve themselves directly in the

development of small hydro power projects, the participation of private developers

becomes essential for the development of the sector.

Since 1993-94, the thrust of the MNRE SHP programme has been development of SHP

projects through public as well as private sector investments. Now a large part of

capacity addition is being achieved through private investment. State Nodal Agencies

provide assistance for obtaining necessary clearances, in allotment of land and potential

sites.

As per the Electricity Act, 2003, the State Electricity Regulatory Commissions (SERCs)

have been empowered to decide on various components of the policy such as tariff,

wheeling, banking and third party sale for grid interactive renewable energy based

power projects, in their respective States. The State Electricity Regulatory Commissions

(SERCs) have been deciding tariff in their respective States. These States are: Andhra

Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgargh, Gujarat, Haryana, Himachal

Pradesh, J&K, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya,

Mizoram, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand and West

Bengal.

The policy for Small Hydro Power (SHP) and private sector participation therein, is

governed by the Electricity Act, 2003, the National Electricity Policy, 2005 and Tariff

Policy 2006 announced by the Government of India. Power is a concurrent subject.

Around 23 State Governments have so far announced policy for private sector

participation for the development of SHP projects.

A review of policy framework for SHP indicates an important role played by MNRE as well

as State Governments. The MNRE schemes aim to provide the required support for

implementation of SHP projects across different States through incentive, resource

assessment, initiatives on training, R&D etc. The role of State Government is important

as all the SHP project allocation happens at State level including taking approval &

clearances. This section details the National and State level policy framework and key

issued highlighted during the field survey.


33

4.3.1 National Level – MNRE SHP Subsidy disbursement framework

CURRENT PROCESS

The MNRE SMALL HYDRO POWER PROGRAMME (upto 25 MW Capacity) provides

incentive framework for promotion of SHP projects. The Ministry of New and Renewable

Energy (MNRE) is encouraging setting up of Small Hydro Power (SHP) projects in the

private sector, joint sector, co-operative sector etc.

The Ministry provides financial support (in the form of capital subsidy) for the new SHP

projects up to 25 MW capacity. The financial support is released in two installments. The

first installment of 50% of financial support is proposed to be released to the financial

institution/bank, after placement of order for electro-mechanical equipment and

disbursement of 50% loan during execution of the project and the balance 50% of

financial support after successful commissioning of project, commercial generation &

performance testing. In case a project is set up by a developer (such as tea garden,

captive power projects etc.) fully through its own financial resources. The total financial

support will be released directly to developer after successful commissioning of the

project & performance testing.

Some of the key steps involved in the current capital subsidy disbursement adopted by

MNRE are:

Developer submits the application form along with all the necessary documents such

as DPR, Allotment letter from state gov./agency, MOU, PPA, Date schedule for

commencement and completion, loan sanction letter, loan agreement letter, and loan

installment release letter.

State gov. dept./agency forwards its recommendation and verifications on the details

given in the application.

FIs/banks will also forward their recommendations & verifications on the details of

the application along with present and proposed financial disbursement.

After completion of project and performance guarantee tests, the developer has to

undertake physical inspection/testing & certification of performance of the project

from AHEC-IIT Roorkee.

Ministry then examines the request and issues “in-principle” approval subject to

fulfilling of all eligibility conditions for the grant of financial support.

OBSERVATION

The survey feedback clearly emphasizes the active role played by MNRE in promotion of

SHP, especially in cases where States have limited capacity. The incentive (capital

subsidy) is indicated as important for the viability of SHP projects as it results in

lowering the tariff and enhances attractiveness of SHP towards PPA signing with Utility.

It has also been pointed out that the capital cost of the projects have increased over the

time, however increase in tariff has not happened in same proportion. Also, capital

subsidy is important considering a number of SERCs separately account for reduction in

tariff on account of capital subsidy provided by MNRE.

A number of developers have clearly indicated requirement for restructuring of the MNRE

subsidy disbursement framework to make it more efficient and speedy. Some of the key

issues/observations are highlighted below:

Procedure to avail Subsidy: The current provision provides that the State Govt.

dept./agency to forward their recommendations & verifications on the details given in

the application with respect to the allotment of project along with present progress &

expected date of commissioning. Recommendations & verifications on the details also

required from FIs/banks. The details requested under the current MNRE scheme are :

Detailed Project Report.


34

Copy of Allotment letter from the State Govt./Agency.

Copy of MOU with State Govt.

Copy of the Power Purchase Agreement.

Scheduled date of commencement of works.

Scheduled date of completion of project.

Expected monthly and annual generation as per approved DPR.

Copy of the loan sanction letter of the Fl / bank.

Copy of the loan agreement between the Fl / bank and the developer.

Copy of the loan installment release letter certificate.

It is pointed out that above information is verified by multiple agencies (mainly State

agencies) and in certain cases it results in delay. To streamline the process, the

feasibility of subsidy disbursement process & verification to directly handled by State

Govt./agency or financial institutions can be evaluated to reduce the time delay in

the process. MNRE can explore providing upfront capital subsidy to State agency/FIs

based on expected annual SHP development in the State.

Developers indicated that since bank guarantee is taken as a collateral, there should

be relaxation in the list of documents required while availing subsidy.

Pattern of subsidy release: It is observed that the pattern of subsidy disbursement

can be reviewed. Currently, the below is adopted :

The developer is required to inform the Ministry about placement of orders for

electro-mechanical equipment, disbursement of 50% of term loan &

achievement of 50% progress on the project to consider for release of first

installment of financial support.

For release of second installment of financial support, the developer would

further inform the Ministry of successful completion of the project, fulfillment

of performance guarantee tests/ testing & certification of performance,

physical inspection of the project and the commencement of commercial

generation.

The developer would send monthly generation report to the Ministry

after start of commercial generation till the time the project attains

80% of the quantum of generation for the corresponding months as

envisaged in the DPR for a minimum of three consecutive months or

80% annual cumulative generation whichever is applicable. The

developer would also provide proof of energy generation such as

certificate from SEB/Power Transmission Corporation/Company etc.

regarding purchase/wheeling of power. In case of grid failure, the

documentary proof from the SEB/Power Transmission

Corp./Company/Utility should be attached.

At this stage, the Fl would submit a certificate to the Ministry that the

project is not a "non-performing asset" (NPA) and the developer is not

a defaulter. In case, the developer is a defaulter/NPA as per the Fl

norm, he will not be eligible for the financial support.

For the release of second installment, it is observed that due to uncertainty in

resource availability on annual and monthly basis, several developers have requested

to review the requirement for 80% generation for the corresponding months for

three consecutive months. Unavailability of water (even on annual basis) results in

delay for undertaking performance testing, which further delays subsidy

disbursement.


35

Given the fact that the developer has fulfilled requirement of performance guarantee

tests/ testing & certification of performance, physical inspection of the project, the

commencement of commercial generation; tranche of subsidy can be released on

achievement of these requirement as the project meets the technical requirements

specified by MNRE. On achievement of 80% of the quantum of generation

requirement, a third tranche of subsidy can be released separately without linking it

with satisfying the technical standards requirement at the stage of COD.

Extension limits under scheme: The current scheme provides: “a grace period of 12

months will be available for the commissioning of project from the original schedule

date of commissioning as indicated by the developer in his application due to natural

calamities and for any other unforeseen reasons for delays during execution of

project.

o For any further delay, the financial support would be reduced @ 5% for every

quarter delay in commissioning of the project. The developers should regularly

inform the Ministry if the project is getting delayed along with detailed

reasons.

The current scheme does not provide on maximum time limit to which the extension

can be provided. The inputs from stakeholder consultations emphasize on the need

for penalize non-serious developers.

Process related issues: Developers feel that there is a need to provide clarification on

the documents required for availing a subsidy. Proper guidance on preparation of

documents will also prove to be beneficial. To provide clarity on the approval process,

there should be an online tracking mechanism for pending and under construction

project. The developer should be mandated to provide details on project status

regularly so that same information is available for MNRE and State agencies for

review.

Eligibility Criteria: Under the current scheme, “the request on application form along

with documentary proof, for the grant of financial support for SHP project, complete

in all respect from the developer should be submitted to the Ministry within six

months from the commencement of project work at the site or within six months

from the date of first disbursement of loan from the Financial Institution / Bank

whichever is earlier.

The scheme links the eligibility with commencement of project work at site. It

is proposed that either this milestone should be clearly defined for providing

clarity on conditions resulting in achievement of this milestone or the

milestone can be linked only with date of first disbursement of loan from the

Financial Institution / Bank.


36

4.3.2 State level – Implementation process

A. Project Allotment and Development

Small Hydro sites across the country are generally identified through two routes. The

first route is where the state agency identifies the site. This can be done either by its

officers posted at the district level, consultants hired by the state or through officers of

the state utilities. In the business as usual scenario the state nodal agencies identify the

sites. The second route is that of identification of site by the developers themselves. The

mechanism for the allotment of the site differs based on the route used for identification

of the site.

The State SHP policies allows for project allotment under different routes. Typically these

are:

Self-Identified Projects –For sites below 2 MW or 5 MW, the project is allocated to

the project identifier. However for projects larger than 5 MW, a bid is invited for the

project and after the bid the project identifier has the option of making or matching

the highest bid and getting the project allocated. In case of self-identified projects,

developers are responsible for developing the Pre-feasibility Report (PFR), requesting

for allotment and once allotted preparing the Detailed Project Report (DPR) and

commissioning the project.

State Identified Projects – In case of state identified project sites, the state or the

state sponsored agencies may identify projects of any size, prepare the PFR and

allocate the site based on the following criteria:

MoU Route – Under this route the state agency invites applications for sites.

The allotment is then undertaken on the basis of the technical and financial

capability of the developer. Based on a technical and financial ranking of

developers, the state agency allocates the project to the most suitable

developer. For example, in case of Himachal Pradesh, the project allotment is

undertaken by marking and then ranking developers (who have applied for a

site) on a scale of 100. The basic issue in this allotment procedure lies in the

fact that it is not as transparent as a competitive bidding process. However

this route does have the advantage of being simpler and easies to implement.

Adjustment of Capital Subsidy in Tariff & related issue

Bonafide Himachalies Hydro Power Developer’s Association have stated that all the

Small Hydro Projects do not get subsidy. It has been mentioned that out of 64

commissioned SHPs, 56% of the Commissioned projects received zero subsidy,

16% have received just fifty percent subsidy and only 28% of the Commissioned

Projects could get full subsidy albeit with deductions for delayed implementation of

the projects.

Reasons include lapse on compliance to the stipulation for timely application to

MNRE (requirement : 6 months from COD or 1st installment of Term loan)

Maintaining 3 Consecutive months for 80% of the generation is difficult (required

for PG test)

HPERC Observation

The statement that 56% of SHPs have not received even the first installment of the

subsidy leads to an observation that either timely applications are not being made

or conditions relating to healthiness of bank accounts are not being complied with.

Himachal Pradesh Electricity Regulatory Commission (HPERC) Order for adjustment of

Capital Subsidy by MNRE (2015)


37

Bidding route - Under this process, states invite bids for particular projects

or sites with bidding parameters Free Power, Upfront Premium, Tariff or State

Equity. Under this process the Pre-feasibility Report is available for project or

the site to prospective developers. Developers usually undertake a PFR before

deciding and making a bid. The project site is transferred to the bidder who

quotes the maximum number above the base case for the identified

parameters.

State wise details of allocation process, premium charged, charges levied by States is

given as under.

Table 9: Project allocation process parameters for select States

Sr.

No. State

Allocation

Process

Threshold

Premium

Charges levied by

State government

1 Uttarakhand

Allocation

through bidding

route for above

2 MW projects

Based on highest bid

over and above a

threshold premium

defined as below.

i. 1 lakh per

MW (between

2 to 5 MW)

ii. 5 Lakh per

MW for above

5 MW

i. Charges on

18% of energy

generated

would be

charged by

State

government

from 16th year

onwards for

projects above

2 MW capacity

ii. In Addition one

time

processing fee:

Rs 50000 and

1 lakh Rs

security

payment

2 Himachal

Pradesh

Allocation

through bidding

route for above

5 MW projects

Projects shall be

allotted through

competitive bidding

route. Bidders are

required to quote

fixed charge of 20

lakh per MW and

additional power at

uniform rate in all

three bands on of

royalty charges over

and above the

royalty charges:

i. Royalty in the

form of free

power as 12%

of delivered

energy @12

years

ii. 18% of

delivered

energy for

next 18 years

Fixed charge of 20

lakh per MW as

royalty


38

Sr.

No. State

Allocation

Process

Threshold

Premium

Charges levied by

State government

iii. 30% of

delivered

energy for the

balance

agreement

period beyond

30 years

3 Arunachal

Pradesh

The Developers

may approach

the State

Government

with self-

identified

projects with

full pre-

feasibility

report (PFR) for

development

on concept to

commissioning

basis

Project allotment

process takes place

based on individual

case to case basis

after scrutinizing a

number of

applications from

various IPP / CPP

developers

Free power charges:

i. Up to 1 MW –

Nil

ii. 1-5 MW -5%

iii. 5-10 MW-8%

iv. 10-25 MW-

10%

4 Kerala

Project shall be

assigned to

private

developers as

independent

power projects

or captive

power project

only through

the competitive

bidding route

on Build Own

Operate

Transfer mode

i. The short‐listed

applicant will

be required to

quote for a

premium per

MW, payable

upfront, to

the

Government.

ii. The minimum

threshold

premium shall

be Rs.15

Lakhs per MW

Not mentioned in the

policy document

5 Karnataka

Self-identified

sites shall be

allocated on

first come first

serve basis

Project allotment

process takes place

based on individual

case to case basis


number of

applications from

various IPP / CPP

developers

One time Processing

fee of INR 2 Lacs/MW.

6 Telangana

Self-identified

sites shall be

allocated on

first come first

serve basis.

Government

identified sites

Project allotment

process takes place

based on individual

case to case basis


number of

applications from

Developer has to pay

one time sanction fee

of INR 1,50,000 and

Security deposit of

INR 1,00,000 per

M.W.


39

Sr.

No. State

Allocation

Process

Threshold

Premium

Charges levied by

State government

shall allocated

through

reverse bidding

process.

various IPP / CPP

developers

7 Punjab

Shall be

allotted

through

competitive

bidding by

PEDA

Project developer

who will provide

maximum discount

on prevailing PSERC

regulated tariff shall

be the selected

bidder for defined

capacity allotment

under SHP scheme

i. One time

charge: 0.5%

project cost as

facilitation

charge

ii. 1.5 paisa per

unit from SHP

site for

Irrigation

department

and

iii. 1.5 lakh per

site per annum

land lease

charges

irrigation

Source: State SHP Policies, Secondary Sources.

B. Approval & Clearances

SHP projects are governed by the State policies and the potential sites are allotted by

the State Governments to private developers. One of the main reasons for the slow

progress can be attributed to the difficult locations where SHP projects are normally set

up, short working season in hilly areas and involvement of private and forest land in

setting up of SHP projects. Implementation of SHP project require undertaking a number

of approval & clearance such as

• techno-economic clearance/technical concurrence,

• land allotment approval

• Forest clearance, and

• Water rights by State irrigation departments,

• NOC from Fisheries and State Pollution Control Board (SPCB),

• Approval from PWD for construction related activities,

Given the allotment and implementation of SHP project is driven by State policies, the

implementation process also varies from State to State. The figures below details the

implementation process adopted by some of the key States attracting SHP investment in

the country. The process mapping is done based on State policies, interaction with

stakeholders.


40

i) Process Flow – Himachal Pradesh

ii) Process Flow – Uttarakhand

* Indicative, discussion with State agencies & developers


41

iii) Process flow for Arunachal Pradesh

iv) Process Flow for Kerala & Andhra Pradesh


42

v) Process Flow – Karnataka

For the purpose of clearances and approvals required to be obtained for SHP, these are

typically categorized into two types namely micro/mini and small hydro categories. In a

number of cases small capacity projects (micro/mini) are being developed by respective

state nodal agencies while small hydro projects (small hydro category) falls under the

mandate of identified agencies by directorate/department of energy in respective States.

List of clearances also vary for small capacity (micro/ mini – projects up to 2 MW

capacity) projects as well for small hydro category (up to 25 MW). Since small capacity

project approvals facilitation as well responsibility is taken up by respective SNAs

(UREDA, HIMURJA) therefore such projects are found to have less impact on time

overruns due to approval / clearance delays. Most delays in approvals and clearances

happen in small category projects having more than 2 MW capacities. Critical list of

clearances are mentioned in the list below.

Forest Clearance

Power evacuation approval and point of interconnection fixation

Revenue land (EC) as there is no timeline has been fixed for Patwari for revenue

record check

Irrigation / Minor irrigation approval

Gram panchayat Approval

Jal Nigam approval

Environmental clearance

Below is the present mandate on state orders on clearances to be obtained for projects

installed in the state of Himachal Pradesh and Uttarakhand. A recent amendment of

HPERC (Himachal Pradesh Electricity Regulatory Commission), policy guidelines taken

from UJVNL3 and discussion provide clarity on these master list of approvals and

clearance as below.

3 UJVNL: Uttarakhand Jal Vidyut Nigam Limited having Head Office in Dehradun, Uttarakhand


43

Table 10: List of clearance and reference clauses for SHP project in Himachal Pradesh

Clearance Description

Upto 5 MW Above 5 MW

Irrigation and Physical Health

These NOCs not required, Clearances and compliance of norms and conditions shall be

ensured by the developer before and during execution

Developer to submit proposal to DC for obtaining all approvals/

NOCs from different departments.

DC to forward the proposal to concerned Dept within 7 days of submission of proposal and convene a meeting of all concerned dept within 30 days to clear the

approval

PWD Clearance

These NOCs not required,

Clearances and compliance of norms and conditions shall be ensured by the developer before and during execution

Revenue Dept Clearance


Clearances and compliance of norms and conditions shall be

ensured by the developer before and during execution

Fisheries Dept

Clearance

These NOCs not required, Clearances and compliance of norms and conditions shall be ensured by the developer before and during execution

Wildlife Dept Approval


Clearances and compliance of norms and conditions shall be ensured by the developer before and during execution

Gram Panchayat

Clearance

Effective consultations shall be done with Gram Panchayat and their objections and suggestions

shall be heard and decided by SDM by way of a reasoned speaking order.

Developer to submit proposal to

DC for obtaining all approvals/ NOCs from different departments. DC to forward the proposal to concerned Dept within 7 days of submission of proposal and convene a meeting of all concerned dept within 30 days to clear the

approval

Essentiality Certificate (EC) for

land lease

This clearance is not required. EC

should be only for maximum quantum of land required for the purpose at project site without mentioning Khasra No. Actual land at project site to be decided

by Forest and revenue dept based

on ceiling under EC

The Essentiality Certificate for land required for the project shall be issued by Directorate of Energy as per actual land requirement on the basis of Joint Inspection Report

duly submitted after carrying out

site inspection by revenue and Forest authorities in consonance with provisions provide in the DPR.

Clearance timeline

for Patwari / Kanoongo

Timeline for issuance will be two

months from date of complete application with fee.

After freezing of components and

submission of PFR, EC for land acquisition, NOC for processing case for diversion of forest land, final environmental clearance, for freezing hydrology and power potential by the authority granting the TC and applying for various

statuary clearances will be issued to IPP.

Source: MPP & Power Department, GoHP Notification Dt. 17/8/2016, SHP Policy of Himachal Pradesh


44

Table 11: List of clearance and reference clauses for SHP project in Uttarakhand

Clearance

description

Reference

Power

Evacuation /

ROW

Permission

The private developer will not be required to obtain Government

permission for the right of way for construction of transmission line

and associated works linking with small hydro power plant with state

grid substation.

However, developer will be required to intimate the owner, the State

Government or Local bodies, as the case may be, in advance for

construction of overhead lines or laying of underground cables

provided the land is filled with earth and properly levelled.

Minor

Irrigation

Clearance

No clearance will be required from the Irrigation Department/Minor

Irrigation Department for Implementation of small hydro power

projects allocated under this Policy, however the Developer will

ensure that the designed water supply to the existing canals/Hydram

schemes in the project area is maintained during the construction

and operation period of the hydro power project.

The selected developer will have to submit a declaration/

affidavit in this regard to the Energy Department / Irrigation / Minor

Irrigation department prior to the construction of the project

Public Works

Department

Clearance

No clearance will be required from Public Works Department for

Implementation of small hydro power projects allocated under this

Policy; however the Developer will ensure that the State Highway /

National Highway roads in the project area and in the vicinity of the

project are properly maintained by the developers at his own cost.

Fisheries

Dept

Clearance

Clearance from fisheries the department will not be required

provided the developer is complying with the provisions of the

Uttarakhand Fisheries Act 2013. The selected developer will have to

submit a declaration/ affidavit in this regard to the Energy

Department / Fisheries Department

Pey Jal

Nigam/Jal

Sansthan

Clearance

Clearance from the Pey Jal Nigam/Jal Sansthan will not be required,

either, if any of the existing water supply project is not being

affected by the proposed hydro project, or if any water supply

scheme is coming in the hydro power project area, the Developer

undertakes to maintain/ rehabilitate the water supply scheme at his

own cost and submit such an undertaking to the Energy Department

and Pey Jal Nigam/Jal Sansthan prior to the construction of the

project.

Forest

Clearance

Required to be undertaken

Environment

Clearance

Exempted for small hydro project of capacity below 2 MW

Gram

Panchayat

Approval

Required to be undertaken based on selective consultations with

Gram Pradhan and Village level committee

Source: UJVNL, Policy for SHP above 5 MW dated. 31/1/2015, RE Policy 2007-08


45

vi) Observations based on field visit and stakeholder consultations on

approval & clearances at State level

The SHP scheme is implemented through the State Government Departments, State

Electricity Board, State Nodal Agencies (SNAs), private developers, individual

entrepreneurs, Non-Governmental Organizations (NGOs), Financial Institutions/ banks

etc. SHP projects have high construction time in comparison to other RE sources. The

implementation involved approval & clearances from different agencies. Recently, a

number of States like Himachal Pradesh, Uttarakhand have provided greater clarity on

approval & clearances, with some relaxation to smaller capacity SHP projects (say upto 2

MW).

To achieve the target in full, the MNRE also undertakes regular consultative/review

meetings are being held with the State Nodal Depts. & Developers. The Ministry is also

trying to get resolved the issues responsible for retarding the pace of implementation of

SHP Projects. This Ministry is also in touch with Ministry of Environment, Forests and

Climate Change for solving the issue related to forest clearances for SHP Projects and

also with State Governments to ease the process of obtaining statutory clearances.

From the perspective of SHP projects, there are delays and problems in according

technical approvals to Detailed Project Reports, allotment of projects, acquiring land for

setting up projects and obtaining forest and environmental clearances, several projects

could not be taken up and completed in time. The table below highlights some of the

issues highlighted across States:

Table 12 : Approval & Clearances issue


Uttarakhand

• Almost all projects in Uttarakhand under primary surveys

have been identified for delayed forest clearance.

• SHP project developers consulted (Gangani, Uttar Bharat,

Polyplex, Parvatiya power) have requested for single window

clearance options for SHP development in Uttarakhand

Himachal

Pradesh

• Forest clearance is also a major issue in Himachal Pradesh.

Delay in forest clearance (Aleo II SHP) was a major issue

Punjab

• Projects in Punjab specifically in Bathinda region shows very

less forest area along canals and hence request Centre to

introduce relaxed substitute mechanism which suits SHP

development in Punjab

Telangana

• State tariffs are perceived to be low which results in delays

in signing PPA since many project developers then opt for

open access for sale to third party.

• All three projects in Telangana area which were surveyed

namely Bravo, Kalavapally, and Malyalappaiah sell energy

through open access


46

Forest Clearance issues: Given the fact that a majority of SHP potential is in States

with high forest cover, forest clearance is an important requirement. Developers

consider getting forest clearance as a significant milestone in the process since its

time consuming. Some of the issues highlighted by developer, which can be reviewed

by MNRE to facilitate speedy approval of forest clearance for SHP projects are:

Developers pointed to delays in clearances for forest land allocation. One of

the main reasons for this delay is the processing of application which includes

checks back and forth through a hierarchy starting from the conservator of

forest rights down to the ranger.

Although forest approval guidelines are quite clear, they are cumbersome. All

the guidelines have to be adhered to, and in case of some missing data or

information or clarifications, the whole cycle is repeated. This can result in a

delay of 6 months to an year. Therefore developers need to be very clear and

thorough while filling out the forest clearance forms. Some developers have

over time mastered this subject, however new developers face this issue.

Right of Way issue: Right of Way width of transmission line has been

increased from minimum to maximum. For instance, minimum requirement

of 33 KV transmission line is 3.66 mtr. which has been increased to 15 mtr.

Instead of 3.66 mtr. Right of Way is not required to be acquired. However,

only one time compensation @ 15% of land value has to be paid as per

provision laid down in Government of India letter No.372015 Trans dated 15

Oct., 2015 (Guidelines for Payment of Compensation towards Damage in

regard to Right of Way for Transmission Lines). Based on stakeholder

consultations, it has come out that the Ministry of Environment and Forest is

stressing the developers to get the land diverted for the construction of

transmission lines for which the corridor specified is many times more than

the actual requirement. Many Projects are not getting clearance on this

account.

In several cases, forest rights committee has not been formed in the villages -

approval of which is a necessary pre condition for forest clearance in case the

land is a community or individual forest land. The delay in formation of these

committees also results in delayed clearances.

Issue of non-linear project: SHP projects are not considered as linear projects

for the purpose of forest clearance.

• SHP projects involve construction of roads, transmission lines, and water

canals laying of pipelines, which may involve several villages, and these

activities are declared as linear in nature by the Government of India.

• FCA committee approval not required for linear projects [hydel currently

not indicated under this exemption]. Hence, if SHP projects are defined as

lineasr projects, this requirement will be exempted.

Development of the Pre-feasibility Report – Some states use the state

utility/agencies (as they are a part of the same government set up) to develop the

PFR. For these utilities, development of the PFR is not a priority and gets delayed

which in turn delays the allocation of the project. Secondly most utilities/agencies

undertake the development of PFR’s using very conventional norms which do not

incorporate all possible innovations from the perspective of cost reduction or capacity

enhancement. Therefore developers usually do not depend on this PFR and get their

own PFR made.

Delays in Allotment of Projects – These delays often take place due to ambiguity in

policy, government transitions or change in management at the State Nodal

Agencies. As SHP implementation is driven by the policy framework at State level,

any delay results in lowering of overall capacity addition.


47

Private Land Allocation – After DPR preparation, land acquisition becomes critical as

any change in site specifications would need a rework of the DPR. This may result in

delays of upto 2 years. Private land owners (especially in HP and Uttarakhand) have

realized the critical importance of land in SHP development and seek out higher than

normal market returns. As a result developers have to resort to taking steps such as

delaying land acquisition, petitioning the district administration and negotiating to

bring the cost of land down. Although, these are business risks to be borne by

developer, however these issues also result in project delay.

Lack of adequate capacity in Project Engineering and Construction & quality of DPR:

In India, especially in the hydro sector, there are limited integrated Engineering,

Procurement and Construction (EPC) contractors. Contracts are mostly split between

civil construction and plant and machinery installation, which makes negotiation of

EPC contracts relatively complex. There is a need to address functional, technical and

price related aspects across contracts, else developers may face the risk of time and

cost overruns and lower profitability. Also, it has been seen that poor quality DPR can

also result in significant delays during construction.

Multiple approvals & NOCs: SHP project allotment involves multiple approvals and

NOCs. In general, for each key milestone the State agencies have defined the

extensions allowed. The basic design of project allocation and approval process in

certain cases results in delay.

As per the “REPORT OF COMMITTEE ON EXPEDITIOUS HARNESSING OF

SMALL HYDRO POWER POTENTIAL IN HIMACHAL PRADESH” (Nov 2013): “It is

apparent from above that inefficiencies are inherent in the preparatory

requirements and the consequent time lines specified in the Power Policy.

These leads to avoidable time and cost overrun and make SHPs non-

competitive. Therefore, there is a need for resetting the time lines and review

the attendant procedures and processes. Ordinarily the NOCs, if at all

required, should be obtained before allotment of project. Once the project is

allotted by the Govt. after prior approval of Cabinet, only the compliance of

statutory provisions, norms and terms and conditions should be provided.

Solutions are very easy to be found, because these are administrative in

nature and are in the hands of Power Department only and also within the

competence of the State Govt. and its functionaries”

It is important for State governments to review the SHP policy regularly and

ensure NOCs, if required, available before the allotment of the SHP project.

This will reduce the delay experienced in the implementation of SHP projects.

During the field visits and stakeholder consultations, the feedback was taken on different

clearance required and extent of delay (if any) experienced by developers. The feedback

indicates environmental/forest clearance as a major milestone in the overall approval &

clearances list. Apart from that, preparation of DPR also take significant time given the

multiple seasons required to capture water flow details. In certain cases, delay in singing

of PPA has also been highlighted. The table below details the average rating (based on

the extent of delay/on-time) for different clearance.

Table 13 : Overall feedback on clearances

Clearance Average rating Expected Time

1- Significant Delays, 3-Neutral, 5-On Time

1 Environmental/forest 2.7 1-3 Years

2 Allotment letter 3.4 <1 Year

3 DPR Preparation 3 2 years


48

Clearance Average rating Expected Time

4 MOU with State Government 3.5 <1 Year

5 Power Purchase Agreement 3 1-2 Years

6 Subsidy Sanction and Disbursement 4 <1 Year

7 Performance testing 3.6 <1 Year

4.4 Commercial

4.4.1 Incentive Options for promotions of SHP project

The choice of public funding instrument should be viewed in the context of the life-cycle

of SHP development in the country, in particular the distance the technology has to

transition to be purely commercial in nature and to achieve grid parity, as this

determines the extent of public funding support required over the entire program cycle.

The figure below indicates such a roadmap and outlines the role of public funding in this

developmental life-cycle of a technology.

Capital subsidy, interest subventions, etc., typically make sense early in the life-cycle of

a technology where the program’s scale and viability are not completely established.

Once the viability is established, market mechanisms should take over with public

funding then switching to a role of facilitating access to private finance by addressing

residual risks and barriers. This is the most economical basis for promoting market

development of a renewable energy technology.

Governments will also need to guard against excessive continuance of public funding in

the commercial phase, as it tends to crowd out commercial sources of financing.

Similarly, lack of public funding in the early stages of development of a technology can

simply impede its deployment and diffusion, irrespective of the long-term economic

benefits.


49

Given the current state of SHP, it is important for MNRE to support the sector through

continued financial support. The key options available for MNRE to support SHP are:

Table 14 : Options for public funding

Public

Funding

Instrument

Pros Cons

Capital

Subsidy

One-time and easy to disburse

for the Government.

Investors & Financiers find it

attractive as it limits exposure of

lenders and lowers tariff of

projects – reduces risk of

defaults and opens up option for

third party sale in case of

defaults.

Project once funded is no longer

dependent on government

budget in the future.

Not linked to output and

hence does not create a

positive bias for performance.

Risk of compromises in O&M

and asset replacements.

Seen as going back in time,

as the focus in other

renewable segments (e.g.,

wind) has moved from capital

based incentives (accelerated

depreciation) to generation

based incentives.

Interest

Subsidy

More efficient than direct

payment schemes as credit is

recoverable.

Government benefits from the

due diligence of commercial

banks, which are the senior

lenders to the project.

Directly reduces the cost of

financing.

Dedicated lines of credit for SHP

projects can prompt commercial

banks to lend to SHP with a

positive externality in building

capacity of such institutions in

appraising SHP projects.

Concessional finance is

limited and unless leveraged

properly, has the effect of

simply crowding out

commercial finance. There

may also be the propensity of

banks to stop lending when

such lines of credit are

exhausted.

Generation-

based

Incentive

Output linked; creates a bias for

performance.

Incentivizes not only developers

but also more efficient equipment

suppliers.

Outflow from the Government

likely to be cumulatively

higher than in the capital

subsidy mode because of

impact of taxes and time

value considerations.

Dependent over a substantive

period on government

funding

Viability Gap

Funding in

tranches up

to one year

post

Commissioni

ng

Front loaded public funding

makes it easy to administer and

disburse.

Like in the case of capital

subsidy, investors & financiers

find it attractive as it limits

exposure of lenders and lowers

tariff of projects – reduces risk of

defaults and opens up option for

third party sale in case of

defaults.

Not linked to output and

hence does not create a

positive bias for performance.

Risk of compromises in O&M

and asset replacements.

VGF scheme in infrastructure

was designed for

economically necessary

projects which were not

commercially affordable.


50

Survey feedback -Preferred Incentives

The field visit and stakeholder consultations indicate that capital subsidy and FIT remain

the preferred incentives. Some developers have shown preference for interest subsidy

also. The table below details the response compiled based on the inputs of field visits.

Table 15 : Preferred incentives

Least

Preferred Neutral

Most

Preferred

Incentive 1 2 3 4 5

VGF 25

FiT 18 7

Capital Subsidy 10 15

GBI 24 1

Interest Subsidy 7 12 6

Some of the key concerns related to incentives are:

Developers consider subsidy as a good source of support. Developers have indicated

that subsidy proves important in getting through the initial phase of loan repayment.

(Binva IV).

Unlike in other renewable energy technologies such as solar and wind wherein

variation in annual resource availability is low, it is high in small hydro power plants.

Cost of power plants also varies given the terrain and ground conditions in specific

states. Due to this reason, direct subsidy and appropriate tariffs linked to specific

states is the best mode of support. Incentives such as GBI and VGF are less

preferred by the developers.

Private developers in Punjab are not interested to avail subsidy due to subsidy is

deducted from the tariff.

Developers have also indicated that subsidy should not result in reduction of tariff.

Developers also indicated that interest subsidy for SHP project can become a great

driver for investment in SHP project and help in keeping the rate of returns from SHP

competitive when compared to other RE technologies.

Further, developers also indicate that subsidy can directly be transferred to bank and

timelines can be reduces given that bank guarantee has to be submitted in any case.

In places like Arunachal Pradesh, developers have indicated that the cost of

construction is as high as 15-20 Crores/MW due to factors such as transporting

material to remote areas, high cost of labor, and high cost of evacuation. North

eastern states require higher subsidy compared to other states due to these factors.

In case of SHP, the sector has seen reduction in investment in the last few years. The

sector is facing issues related to time and cost overrun, increase in capital cost over the

years & the tariff has not been increased at the same rate of capital cost increase. The

SHP projects also offer advantage of enhancing rural economy and infrastructure

development.

The Ministry is giving special emphasis to promote use of new and efficient designs of

water mills for mechanical as well as electricity generation and setting up of micro hydel

projects up to 100 KW for remote village electrification. These projects are taken up with


51

the involvement of local organizations such as the Water Mills Associations, cooperative

societies, registered NGOs, village energy cooperatives, and State Nodal Agencies.

Given the nature of SHP project & benefits offered, it is important that appropriate

incentives are provided to reduce the burden of developers. The incentives by MNRE can

also be used to test new business models at state level or provide additional incentives

to State agencies to reduce the bottlenecks faced by SHP developers.

4.5 Regulatory

The Electricity Act 2003, enables and enjoins the State Electricity Regulators to promote

renewables by providing suitable measures for connectivity with the grid, open access to

enable producer to sell power to any person and specify minimum purchase obligation

from renewable sources and consequent regulations for tariff also. SERCs across states

have been fixing feed-in tariff, OA charges and other aspects for grid connected SHP

projects.

Some of the key regulatory issues faced by SHP projects are:

1. Adequacy of Capital cost

Feed-in Tariff remains an important regulatory instrument for promotion of SHP projects.

States across India have a varying tariff structure and given the unique nature and risks

involved for each, SHP project developers find these tariffs unattractive. Generic tariffs

do not cover the capital cost associated with project specific cost factors for SHP project.

Differing regulatory cost benchmarks across states lead to clubbing of projects in states

which have the most investor friendly framework. The cost benchmarks differ

significantly. CERC as a part of its regulatory process provides capital cost and tariff

benchmarks for different States. A comparison with the State regulator determined

tariffs indicates that the SERC adopted cost benchmarks are on lower side.

The tables below details the capital cost and feed-in tariff calculated by CERC:

Table 16 : Capital Cost & Tariff benchmark - CERC

State Category Capital Cost,

Rs Lakh/MW

CUF, in % LCOE,

Rs/kWh

CERC (NE States,

HP, UK, West

Bengal)

Below 5 MW 1,000 45 5.07

5 MW to 25

MW

900 45 4.29

CERC (Other

States)

Below 5 MW 779 30 6.00

5 MW to 25

MW

707 30 5.04

The below table details the capital cost and tariff benchmarks determined by different

SERCs:

Table 17 : Capital Cost & Tariff benchmark - SERC

State Category Capital

Cost, Rs

lakh/MW

CUF% Gross

Tariff,

Rs/Unit

AD,

Rs/Unit

Net

Tariff,

Rs/Unit

Himachal

Pradesh

100 kW to 2

MW

780 55 3.34 0.14 3.20

2 MW to 5

MW

750 55 3.27 0.14 3.13

5 MW to 25

MW

700 55 3.17 0.13 3.04


52

Uttarakhand Up to 5 MW 785 45 4.22 0.30 3.92

5 MW to 15

MW

750 45 4.02 0.30 3.72

5 MW to 25

MW

715 45 3.74 0.30 3.44

Punjab* Up to 5 MW 779 30 5.54 - -

5 MW to 25

MW

707 30 4.69 - -

Kerala Up to 5 MW 630 30 5.25 - -

5 MW to 25

MW

577 30 4.47 - -

Karnataka Mini hydel 620 30 4.16 - -

Telangana All sizes 450 45 3.63

Arunachal

Pradesh

Below 5 MW 700 37.64 - - 2.46

* PSERC, Discussion paper, Punjab to follow CERC norm

The above table clearly indicates the variation in capital cost and final FIT considered at

State level when compared with CERC benchmarks.

2. Inter-State open access Charges

Pursuant to the mandate of EA 2003, and in line with the National Electricity Policy and

Tariff policy notified by the Central Government, the Hon’ble Central Electricity

Regulatory Commission has framed various regulations for promotion of RE sources viz.

RE tariff Regulations, REC Regulations etc., and also waived the transmission charges

and energy losses for transmission of Solar and Wind Power throughout the life of the

project, in its various Regulations.

The Ministry of Power (MOP) Order “Waiver of inter-State transmission charges and losses

on transmission of the electricity generated from solar and wind sources of energy under

Para 6.4(6) of the revised Tariff Policy” dated 30 Sept. 2016 had the below provision (Para

3.0 (iii):

“For generation projects based on solar resources, no inter-State transmission

charges and losses will be charged for use of inter-state transmission on system

(ISTS) network by such projects commissioned till 30.6.2017 as per the CERC

(Sharing of Inter-State Transmission Charges and Losses) (Third Amendment)

Regulations, 2015.

Provided that this waiver will be available for a period of 25 years from the date of

commissioning of such projects. “

The Ministry of Power through the order dated 14th June 2017 has extended the

exemption on inter-state transmission charges & losses to solar projects commissioned

till 31.12.2019.

However, the Small Hydro Power renewable has not been provided any relief in the

transmission charges/losses for inter‐State transfer of power. The same benefit can be

provided to SHP projects also.

3. Restructuring levelised tariff to ease liquidity

When utility and IPP agree to enter into PPA, they have an option, to be exercised at the

time of signing PPA, to go for generic levelised tariff for 40 years fixed by Commission or

determination of project specific tariff, levelised for 40 years. The SERCs can consider


53

providing higher level of tariff in the initial years to developer to assist them in having

higher liquidity and repay loans

4.6 Financial Aspects

Developing SHP projects require developers to address site, policy, regulatory etc related

risk which impact the financial viability of the project. Geological surprises can have

large impact. Some of the financial aspects related to SHP projects are:

High Investment costs: Hydro is one of the most expensive renewable energy

technologies to develop due to its high upfront costs from detailed engineering

requirements, remote locations, synergizing civil and electromechanical works and

also the high risks of Force Majeure events which sometimes further drive up the

costs making these projects all the more unattractive for private developers.

Difficulties in availability of finance: Lack of adequate financing also discourages

developers especially the first generation entrepreneurs in the development of Small

Hydro Projects. Financing organizations, such as banks and other financing agencies

are still by and large not confident of the success of small renewable energy

interventions like Small Hydro.

Most financial institutions are likely to finance only well-established corporates

developing large scale projects and as a result small first time developers who cannot

put up enough collateral are not in a position to get enough funds. In Himachal,

Small Hydro Projects have been reserved for bona-fides residents of the state only.

With an approximate cost of about Rs 7-10 crore a Megawatt, developing a 5 MW

plant would entail an expenditure of anywhere between Rs 35-50 Crores of which a

minimum equity an entrepreneur would have to put up would be Rs 15 Crores. Most

banks request developers to either furnish guarantees or provide adequate collateral

which very few are able to accomplish.

Further, large pre-investment costs related to the costs of due diligence, bidding,

contracting, and information collection drive potential investors away from the sector.

In case of the small hydro sites the capital costs of setting up the project were divided

into four main components that have been indicated below:

Civil costs.

Electromechanical equipment costs

Cost of the penstock

Transmission and distribution costs

Installation charges.

The civil costs for the construction of SHP sites cover the cost of the construction of most

of the project components with the exception of the penstock. Thus this cost includes the

cost of setting up of the room that would house the generator, turbine and the control

equipment, cost of the construction of the weir; for the tank, power channel and de-

silting basin. The cost of construction for each of these is estimated based on the local

conditions, terrain and the kind of material as well as infrastructure available at the sites

for the construction of the said components.

The electromechanical costs include the cost of the generator, turbine, the control

equipment and other subsidiary equipment required for the operationalizing the plant.

This also includes the cost of installation of the equipment and its testing as well as

monitoring during the initial period of the project. Cost of the penstock includes the

material costs, cost of transportation and the civil costs associated with its installation.

The terrain and the site characteristics call for long penstocks at most of the sites that

have necessitated this separate accounting exercise.


54

The transmission and distribution costs consist of extending a grid from the site to the

villages and these costs consist of material costs of the poles, wires and routers as well

as other equipment and the installation and civil costs. The final costs for each were

computed by taking into account the total cost of material, transportation charges and

installation charges.

The capital cost of projects varies with scale of the projects and impact the financing

requirement. AHEC has undertaken comprehensive study (year 2015) of the trends of

cost of small hydro power projects and to update/establish nomograms costing of

canal/dam toe and run of river based SHP projects upto 25 MW capacity and comparing

with large hydropower project. The objective was to provide clarity financial institutions,

regulators, developers, policy makers on the capital cost benchmarking. The study

revealed the reduction of capital cost in per MW basis with increase in scale of project.

Figure 5 : AHEC Capital Cost benchmarks

The project cost is higher in the states of Arunachal Pradesh, Himachal Pradesh,

Uttarakhand, Andhra Pradesh, and Punjab as compared to Kerala and Karnataka. The

typical break-up of different cost components are indicated below:

Table 18 : Capital Cost break-up

State Per MW Cost (Lacs) Civil E&M T&D Other

Himachal Pradesh 966 49% 28% 5% 18%

Uttarakhand 1037 50% 16% 4% 31%

Andhra Pradesh 904 48% 32% 1% 18%

Kerala 748 59% 39% 1% 1%

Karnataka 705 48% 37% 6% 9%

Punjab 913 40% 56% 2% 2%

Source: AHEC Benchmark Cost report- Aug, 2015


55

Key issues resulting in cost

over-run

SHP projects are prone to cost and

time over-run which further results

in increase the overall project cost.

One of the main reasons for

difference in cost of DPR and actual

cost is the escalation in the civil

costs.

The table below details some of the project where cost over-runs have occurred:

Table 19 : Capital Cost escalation

Project Commissio

ning Year

DPR (INR

Cr)

Actual

(INR CR)

Capacit

y (MW)

Per

MW

Cost

(DPR)

Per MW

Cost

(Actual)

Escalati

on

UK-

BhilanganaIII/1/24MW/

ROR

2013 36 60 4.9 6.00 10.00 67%

UK-

Regency/5/8MW/ROR 2014 38.4 51.2 8 4.80 6.40 33%

Ker-

Adyanpara/1/3.5MW/RO

R

2015 26.81 28.56 3.5 7.66 8.16 7%

Ker-

Raniperunad/3/4MW/RO

R

2012 21.3 35.81 4 5.33 8.95 68%

Ker-

Vellathoval/5/3.6MW/R

OR

2016 32.32 36.54 3.6 8.98 10.15 13%

Tel-

Bravo/1/1.2MW/Canal 2013 7.75 11 1.2 6.46 9.17 42%

Tel-

Kalavapally/2/0.75MW/

Canal

2016 6.393 10 0.75 8.52 13.33 56%

Tel-

Malyalappaiah/3/0.9MW

/Canal

2014 6.826 10 0.9 7.58 11.11 46%

ArunPra-Nuranag

Yet to be

commissione

d

14.73 18.43 1 14.73 18.43 25%

ArunPra-Khajalong

Yet to be

commissione

d

24.36 29.95 2 12.18 14.97 22%

Figure 6 : Capital Cost escalation issues


56

Project Commissio

ning Year

DPR (INR

Cr)

Actual

(INR CR)

Capacit

y (MW)

Per

MW

Cost

(DPR)

Per MW

Cost

(Actual)

Escalati

on

ArunPra-Zhandongron

Yet to be

commissione

d

14.06 15.40 1 14.06 15.4 10%

ArunPra-Payu

Yet to be

commissione

d

9.36 22.48 1 9.36 22.48 140%

Source: Stakeholder Consultation

The key reasons for cost over-runs are as follows:

Table 20 : Survey feedback – cost over-run


Himachal

Pradesh

• Geological surprises associated with tunnel boring and shed

strengthening. (Beas Kund, Iqu II)

• Inflation in civil cost due to project implementation delays. (Hurla)

• Flooding during construction which leads to damages leads to cost

escalation. (Dikleri)

• There is uncertainty in cost of land acquisition due to local issues

which can result in cost escalation. (Neogal – Kangra)

Uttarakhand

• Cost impacts of geological surprises (i.e. Tunneling, transportation,

accidents, and flooding) faced during project construction such as

the one seen in (Bhilangana III).

• Cost impacts of adverse weather conditions faced during project

construction. i.e. Cloud bursts and floods. (Loharkhet).

• Design failures associated with various factors.

• Cost associated with land acquisition.

• Normal increase in cement and construction material cost over the

years with significant time lapse between DPR preparation and

project construction.

Kerala • High cost associated with procuring land and managing difficulties

associated with terrain. (Adyanpara and Meenvallom)

Andhra

Pradesh

(Telangana)

• Cost escalation related to flooding and channeling(Bravo and

Kalavapally).

Arunachal

Pradesh

• Developers indicate that cost of transporting material can go up by

80 to 150% due to difficulty in accessing remote sites.

• Cost overrun also occurs in creating evacuation infrastructure due

to poor grid infrastructure.


57

Karnataka

• Similar to other states, construction of Aramdanahalli project faced

various geological surprises e.g. additional rock excavation which

was not envisaged in previous designs.

Inflation due to delays in project implementation is a major reason for cost

escalation followed by geological surprises

Most projects report a cost escalation of 20-25% from DPR due to inflation.

Geological surprises not detected during design for tunneling and boring impact

project cost increase

Natural events such as due to rains and flooding and uncertainties in land prices.

Several developers indicate there should more flexibility in cost and time

considerations.

4.7 Employment and Economic Benefits

Investment in SHP project offer employment and economic benefits for rural area.

Various activities for rural development through small hydro power such as efficient

water mills, livelihood activities using small hydro power illumination of remote villages,

electrification, etc. can be of great benefit.

Some of the key socio-economic benefits from small hydro are detailed below.

SHP project has positive impact on local employment as well as overall rural economy.

The field visits and stakeholder consultations indicate the increased infrastructure

development in terms of roads, electricity etc. in the area where the SHP projects have

been implemented. Some of the key findings of the field visits from the perspective of

their impact on rural economy are:

Given the nature of sites for small hydro power plants, most projects have been able

to generate local employment in that area. Except for jobs which require high

qualification, most of the workforce is hired from the local area.

Figure 7 : Economic benefits of SHP


58

Power plants employ 8-10 people/MW on an average. This figure can vary depending

on the scale of the power plant and their specific requirements. During the

construction period the level of man-power requirement is high.

Apart from jobs, several projects take more active interest in engaging with local

communities by providing financial assistance to local schools, libraries, and taking

part in cultural events.

Many rural areas which did have access to electricity near these power plants faced

issues with low voltage. The low voltage situation has improved since the

construction of small hydro power plants in surrounding areas.

Several power plants also provide free electricity to local communities by reimbursing

their electricity bills(Toss SHP project (Himachal Pradesh) reimburses electricity bills

of villagers with a cap of INR 500 per Month only for domestic connections)

Water levels have also improved in regions surrounding small hydropower plants

(select projects).

4.8 R&D and Human resource development

MNRE provides financial support to industry and government institutions for undertaking

research and development, training & capacity building in the field of small hydro power

on project case to case basis. The MNRE current scheme ranges from providing direct

funding for creating labs to capacity building of personals. The table below details the

key features of current MNRE scheme.

Table 21 : Current scheme of MNRE

Particular Details

1 Objective of the

scheme

The strengthening of technical institutions, setting up of

turbine laboratory, business meets, training

programmes/courses, fellowships etc., monitoring of

SHP projects, consultancy and/or any other activity felt

necessary for the SHP development will also be

considered under the scheme.

2 Selection

procedure and

level of financial

assistance

a) The financial assistance for R&D proposals will be

considered on cases to case basis on the RD&D scheme

of the ministry.

b) The financial assistance upto 100% of the activity

cost will be considered for capacity building on case to

case basis.

3 Eligible institutions

for R&D

Government departments/ agencies/ PSUs/ institutions

and industry which have adequate infrastructure can

apply for R&D

4 Eligible institutions

for capacity

building

a) State governments departments/ State Nodal

Agency/ Local bodies/ co-operatives/ Autonomous

institutions like AHEC, etc. & NGOs

b)Channel partners appointed by state government/

state nodal agency/Dept./MNRE can also apply


59

5 Activities allowed

under capacity

building

a) Capacity building proposals shall only cover human

resource development.

b) Infrastructure development or asset building will be

considered except for development of water mill center.

6 Pattern of release a) Financial support for RD&D projects would be

released as per the RD&D policy of the ministry

b) For capacity building, 70% of incentive with sanction

and 30% on submission of completion report.

The Alternate Hydro Energy Centre (AHEC) at the Indian Institute of Technology,

Roorkee, was established in the year 1982 with initial sponsorship of the Ministry of New

and Renewable Energy. AHEC has been providing professional support in the field of

Small Hydropower Development covering planning, Detailed Project Reports, Detailed

Engineering Designs and Construction drawings, Technical Specifications of Turn Key

execution/equipment Supply, Renovation and Modernization of SHP Stations, and

Techno-Economic Appraisal.

4.8.2 Research & Development

The Alternate Hydro Energy Centre (AHEC) has led the research and development

activity in the small hydro sector in India. AHEC is an academic center based out of IIT-

Roorkee which provides professional support for R&D, Monitoring of projects, Remote

sensing and GIS based application, and technical support to various private, state

government, and central government agencies.

AHEC houses various facilities in its campus to undertake these activities.

Table 22 : Facilities at AHEC

Labs Features

International

Level Hydraulic

Turbine Lab

R&D, testing & certification for hydro turbine

Developing human resource for SHP in respect of

entrepreneurs, plant operators and researchers

Generating data, building expertise & providing facility

for SHP projects.

Validating designs of small hydro turbine and layouts

using CFD technique

Providing calibration fac damages to plant

Provides instruments used for field-testing and power-

plant operation.

Real time

simulator for SHP

Realistic simulation of SHP, it’s control

environment(hardwired & soft panels)

Reduces O&M costs, training time and damage to plants

Increases generation and plant life

Can be quickly initialized, modular system and updating

is possible

Uses long term dynamic model to simulate prime

movers, generators, governors etc


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Other Labs GIS Lab

Biomass System Lab

Electrical Machines Lab

Control Systems Lab

Hydro-mechanical System Lab

Instrumentation Lab

Civil Engg. Lab

Sediment Monitoring and Impact Analysis Lab

The data bank for small hydro projects developed at AHEC has been very useful to

various stakeholder in public and private sector. AHEC has also developed two new

designs of water mills for grain grinding and for mechanical/electricity generation

purpose for the hilly regions of the country.

Installed facility at AHEC available for testing and training purposes

Figure 10 New Turbine Testing Facility

Figure 8 Micro Turbine Testing Lab Figure 9 Inspection Kit Room

Figure 11 Real Time Simulator for SHP Plants and Training Facility


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Case study

Research Institutions like NREL, USA have dedicated programs for assisting the

commercialization of technologies.

The NREL Commercialization Assistance Program (NCAP) helps emerging companies

overcome technical barriers to commercializing clean energy technology. The program

provides free assistance or information to help small businesses with specific technology

questions or needs. Examples of assistance include short term access to technical

expertise and facilities such as:

Test and measurement of systems or components

Analytical testing of materials

Insights on existing or emerging technologies

Assistance in addressing technological performance and market analysis

Addressing general technology problems.

Additionally, businesses that use NCAP can get a royalty-free, non-exclusive license for

any inventions made during the course of technology assistance. Also, intellectual

property associated with a pre-existing product or invention remains the property of the

business.

The table below summarizes the different types of mechanisms/models for

commercialization:

Table 23: Technology Commercialization Mechanism

Focus Area Key Elements

1 Technology

Incubators

Specialized incubation facilities to assist

entrepreneurs on supporting technology based start-

up firms.

Provide supportive framework and access to R&D

facilities, administrative, management guidance and

logistic support for specific technology projects

Targets to support incubation & start-ups to promote

the commercialization of technologies

2 Technology Transfer

Involve transfer of intellectual property and licensing

as well as those that do not involve the transfer of

intellectual property

Includes assignment of patent rights, patent

licensing, and transfer of know-how or other

technology.

3 Cluster Formation Focused on setting up of clusters to promote the

development of RE technology

4

Govt. & private

Collaboration

Structures

Government/ public agencies collaboration:

Collaboration with government/public agencies as

well as departments is one of the common structures

adopted by research institutions and universities for

promotion of solar energy

Public Private Partnership (PPP): technology is

developed by a government funded research center

or university, and then transferred and

commercialized by the private sector

5 Dedicated funding Dedicated funding for commercialization of

technologies has been supported by different

countries.


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Generally, the government provides such funds and

is utilized by the research institutions and

universities for commercialization by involvement of

the private entities.

4.8.3 Training & Capacity Building

Efficient functioning of a small hydro power plant is critical for maintaining the

profitability of the project. Frequent downtimes due to operational issues which can be

avoided through proper training and capacity building of plant personals can reduce a

projects’ payback period directly. This can also help maintain plant quality which can

generate cost savings across the plant over a long term and increase profitability.

MNRE provides funding to AHEC to conduct training programs on regular basis. AHEC has

been imparting training to field engineers and technologists through short-term training

courses. AHEC offers a four semester Master of Technology (M.Tech.) programme in

"Alternate Hydro Energy Systems". The table below details some of the trainings

provided by AHEC:

Table 24 : Training Programs offered by AHEC

S.No. Name of Course Schedule

No. of

Participan

t

Funded by

1. Small Hydropower

Development

Mar 20-24,

2017 15

MNRE, New

Delhi

2.

Performance Testing

and Evaluation for SHP

Stations

Dec 19-23,

2016 16

MNRE, New

Delhi

3.

Hydropower

Development for the

officers of Water

Resources Department,

Maharashtra

Dec 12-24,

2016 36

Water

Resources

Department,

Maharashtra

4.

Selection & Design of

Electro-Mechanical

Equipment for SHP

Nov 21-25,

2016 11

MNRE, New

Delhi

5.

Operation &

Maintenance of SHP

Stations

Sep 19-22,

2016 9

MNRE, New

Delhi

6. Small Hydropower

Development

Aug 29-Sep

02, 2016 15

MNRE, New

Delhi

7.

DPR Preparation and

Evaluation for SHP

Projects

May 31-Jun

03, 2016 21

MNRE, New

Delhi

8. Small Hydropower

Development

Feb 15-19,

2016 19

MNRE, New

Delhi

9.

Performance Testing

and Evaluation for SHP

Stations

Dec 14-18,

2015 16

MNRE, New

Delhi


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The infrastructure developed at AHEC is used for providing training in SHP segment. A

real time digital simulator for small hydropower plants has been established with the

support from the Ministry for providing efficient initial and advanced training to operators

and engineering staff of different types of small hydroelectric plants.

4.8.4 Technical Standards & Manuals

Standards, manuals and guidelines for various aspects of small hydropower development

are being prepared by AHEC through consultative process with the sponsorship of MNRE.

The standards play an important role in providing clarity to developers, financial

institutions, technical institutions etc, towards the best practices for implementation of

SHP projects.

Below is the list of standards developed by AHEC, which covers the complete life cycle of

SHP projects.

Table 25 : List of standards for SHP projects

1 General

1.1 Small Hydro Power Definitions and Glossary of Terms, List and Scope of

Different Indian and International Standards / Guidelines / Manuals

1.2 & 2.1 Planning and Layout

1.3 Project Hydrology and Installed Capacity

1.4 Reports Preparation: Reconnaissance, Prefeasibility, Feasibility / Detailed

Project Report and As Built Report

1.5 Project Cost Estimation

1.6 Economic and Financial Analysis and Tariff Calculation

1.7 Model Contracts for Execution and Supplies of Civil and E&M Works

1.8 Project Management of Small Hydroelectric Projects

1.9 Environment Impact Assessment

1.1 Performance Evaluation of Small Hydro Power plants

1.11 Renovation, Modernization and Uprating

1.12 Site Investigations

2 Civil Works

2.2 & 2.3 Hydraulic and Structural Design

10.

Selection & Design of

Electro-Mechanical

Equipment for SHP

Nov 16-20,

2015 23

MNRE, New

Delhi

11.

DPR Preparation and

Evaluation for SHP

Projects

Aug 24-27,

2015 21

MNRE, New

Delhi

12.

Operation &

Maintenance of SHP

Stations

Jul 13-16,

2015 16

MNRE, New

Delhi

13. Small Hydropower

Development

May 25-29,

2015 24

MNRE, New

Delhi


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2.4 Maintenance of Civil Works (Including HydroMechanical)

2.5 Technical Specifications for Hydro-Mechanical Works

3 Electro Mechanical works

3.1 Selection of Turbine and Governing System

3.2 Selection of Generator and Excitation Systems

3.3 Design of Switchyard and Selection of Equipment main SLD and Layout

3.4 Selection of Control, Automation, Protection and Monitoring System

3.5 Design of Auxiliary Systems and Selection of Equipment

3.6 Technical Specifications for Procurement of Generating Equipment

3.7 Technical Specifications for Procurement of Auxiliaries

3.8 Technical Specifications for Procurement and Installation of Switchyard

Equipment

3.9 Technical Specifications for Procurement of Control, Automation,

Protection and Monitoring Systems

3.1 Power Evacuation and Interconnections with Grid

3.11 Operation and Maintenance

3.12 Erection, Testing and Commissioning

4.8.5 Key observations

SHP projects are installed in remote areas and face issues related to increasing capital

cost. It is important that the research & development activities, standardization results

in enhancing efficiency and reducing the overall cost of SHP project implementation.

Some of the issues identified during the field study and stakeholder consultations are:

Operating staff at power plants indicated that they face difficulties in managing

situations wherein there is high silt depositions. Training in silt management required

to boost the efficiency of power plants.

Need to study the impacts of climate change on the hydrology of existing and

upcoming small hydro projects on a broad scale.

This would mean analyzing the natural variability of resource cycle as well as

the increase in variability that will be caused due to climate change. Several

developers indicated that consistency in resource availability year on year is

an issue. Evaluating climate change impacts on small hydro projects will

become critical for understanding economic sustainability of projects and long

term growth of the sector as well.

Developers indicate that there is sufficient potential to generate additional energy

from the tail race of their power plants and availability of ultra-low hydel turbine can

help them in addressing this.

Several developers also indicated that the quality of their DPR in terms of yield

estimates was very poor. One of the main reasons stated was the availability of site

specific granular data.

AHEC has provided its feedback on its ongoing research, development, and capacity

building activities as well as the road for the future ahead.


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Table 26 : Feedback from AHEC on Issues

Sr. No. AHEC Feedback on various issues

1

Streamlining funding for training and development of personals in the

sector is central to various activities undertaken by AHEC. AHEC undertakes

10-15 various training programs. Usually, the clearance for funding from

MNRE for these annual programs comes in by march. The support from

MNRE has been vital in shaping these programs however the amount of

funding fluctuated from year to year. Consistency in amount of annual

funding will help AHEC to better manage capacity building in the country.

Further, there is a need for increasing the allocation of education and

fellowship activities.

2

Timelines for project proposal approval are important: The support of

MNRE for R&D activities has proved to be beneficial. Further there is a need

for the approval process to be streamlined in terms of approval time.

It would benefit AHEC if it could receive timely communication of status of its

submitted project proposal and timely decision on the same.

3

Issues with current industry practices: AHEC has reviewed various

projects across the country for performing test and other resource

assessment activities. During their review of various projects they found that

there are issues with hiring of professional consultants for design and

construction due to which the project quality is affected. They also found

that various developers oversize the site installed capacity.

4

Future ahead: AHEC would be willing to support MNRE with a data

collection framework given the required funding is provided to help build a

hydrology database which project developers can use to accurately perform

resource assessment.

Further AHEC is working on research projects such as hydraulic turbine

simulation, sediment analysis, low head turbine testing, and methodology for

resource assessment. AHEC has stated that the support from MNRE would be

important for success of these ongoing projects.

AHEC further engages with various industry players to address technical

issues and help in finding the right solutions using its expertise.

5.

Installed facility in AHEC: AHEC has a well-equipped facility for providing

training & development as well as testing e.g. Turbine simulator, Ecosystem

testing lab, hydraulic turbine lab, solar lab, and an RE lab.

It is well acknowledged that MNRE through AHEC has undertaken capacity building

measures, preparing data banks on technical standards, issues etc. It is important that

MNRE should consider enhancing the scalability of the training programs through online

training courses. Also, with SHP potential dispersed across different regions, it needs

explore developing regional centres of excellence to promote SHP.

4.9 Water mills projects

Water mill as a technology dates back to the 7th century. Its various applications today

include rice hulling, milling of grains, electricity generation, and other mechanical

applications. Water mills (traditional name: ‘Gharat’) have long been a source of

livelihood in hilly areas such as Uttaranchal, Himachal Pradesh, and North East India as

well as states such as Kerala. People from nearby villages come to process their grain at

the Gharat and usually the Gharat owner either charges a payment or gets to keep a set

quantity of the processed flour i.e. 1 to 2 Kgs for every 10 KGs processed. Gharats are


66

also used to generate electricity for either household consumption or for feeding to local

community.

The profitability of a Gharat depends on the

amount of water flow that is available

round the year as well as efficiency of the

water wheel and cost associated with its

maintenance (INR 5k to 10K annually).

Competing and more efficient modes for

milling of grains and access to electricity

also impacts the profitability of Gharats i.e.

electric grinding mills which are must faster

and access to grid electricity reduces

dependence on Gharats. Further changes in

cropping patterns in surrounding villages

may also have an impact. Gharat owners

indicate that while profits may be reducing

or fluctuating over the years, Gharats still

help them in generating savings for

personal use.

With various factors impacting the

profitability of Gharat owners and given

that Gharat provides the opportunity to

owners for maintaining a traditional way of

life through sustainable livelihood, it makes

a strong case for capacity building through

modernization and increased engagement by central, state, and independent agencies.

Gharat(Watermill) owners across the country have benefited from the MNRE scheme for

watermills. The level of central financial assistance provided by MNRE for Watermills and

Micro Hydel Projects is as follows:

1] Watermills:

Sr. No. Category of Watermill Amount of CFA

1 Mechanical output only INR 50,000/- per watermill

2

a) Electrical output (up to 5 KW)

Or

b) Both mechanical and electrical output

INR 1,50,000/- per

watermill

2] Micro Hydel Projects up to 100 kW capacity:

Sr. No. Areas Amount of CFA

1 All states INR 1,25,000 /- per kW

A minimum contribution of 10% of project cost should be met by the

beneficiaries/project owners under the MNRE scheme. On interacting with state hydro

power development agencies or state nodal agencies (SNA), it was found that usually

the beneficiary that is the village resident would prepare the required civil work for the

setting up the watermill post which the SNA procures the required machinery and installs

it. State agencies play a critical role in empowering local population, providing

appropriate information, and being proactive in implementation of the project.


67

MNRE provides assistance to SNA for service charges for each watermill and micro hydel

project. MNRE has also provided assistance in the past for creating of watermill

development centers for promotion, service, and increasing awareness of watermills in

Uttarakhand and Arunachal Pradesh.

Various issues were identified through the survey and interaction with state agencies and

watermill owners which needs to be addressed.

Table 27 : Various Issues as identified during the survey- Watermills

Area Description of issue

Awareness

• Water mills owners in Bageshwar, Dehradun districts were

not familiar with subsidy disbursement mechanism. Similar

issue of lack of awareness can be seen in other states as

well.

Design

effectiveness

• Project under Dehradun districts have revealed under

performance of even the improved runner design as same

cannot operate below a rated capacity if the availability of

water in the source is lesser then expected in lean seasons.

• Bandawali (Uttarakhand) water mill operator reported that

the runner is required to be replaced after the monsoon

season due to high wear and tear due to increased sediment

content in water. Watermills usually operate for over 10

hours in a day.

Plant

shutdown

• Due to inadequate design of channel diversion, water mill

owners have to shut down operation of water mills during

monsoon season (3 to 4 months) due to heavy water flow.

• On the other hand, Water mills in Himachal Pradesh face

resource constraint due to small hydro projects being setup

up-stream.

• Micro hydel turbine in Thiyamankuddy settlement in Kerala

has to undergo frequent shutdown upto a week’s time due to

circuit breakdowns due to rodents eating away into the

circuit. Maintenance engineers travel from far off places to

reach the facility which causes delays in rectification.

Difficult

terrain for

access

• Remote location of watermill from the habitat create issues

related to access.

Market

competition

• Water mill owners are facing lot of competition from

electrical based water mills/ villagers are not willing to go to

the location of water mill located in difficult terrain

Climate

variability

Impact

• Several water mill operators indicated that their output has

been reducing over the years due to lack of rainfall.

Maintenance

issues

• High cost of maintenance related to watermills puts a burden

on the watermill owners reducing the benefits that they can

receive.

From the overall survey feedback, there are issues such as awareness, capacity building

for local maintenance activities, reducing cost of maintenance, increasing

competitiveness, and improving design for reliability. These issues need to be addressed

for watermills to continue performing as a source of sustainable livelihood for their


68

owners and maintain a traditional way of line. Watermills and micro-hydel alike provide a

great opportunity to empower local communities. A case study on a micro hydel power

plant provides an overview of the benefits.

Case Study : Electrification of Tribal Colony in Thayamankudy settlements in

Chinnar Wildlife Sanctuary (Kerala) with the use of a 7.5 kW Pico Hydel Turbine

Case Study of Thayamankuddy settlement in Chinnar wildlife sanctuary.

A 7.5 kW micro hydel turbine at the cost of 8 Lacs was commissioned in June 2016

with the help of financial assistance from EMC Kerala and MNRE

Economic activity and safety:

• Powers the street lights in the village which makes it easier for people to

commute and perform economic activities till late in to the evening.

• It has also helped communities secure their safety from wild animals which

avoid coming near the village due to light sources.

Living standards:

• Provided ease for performing chores such as cooking in the evening and has

improved the living conditions of women in the village.

Education:

• Electricity connection in school has helped the local school improve the

attendance of students from the village.


69

• Having light inside their house has also improved the studying conditions for

students in the village.

Health:

• Local Anganwadi has also benefited with the electricity connection. They have

now installed a weighing machine which is very essential to check weight of

new born babies and check their health.

Savings:

• Charging point provided inside each household helps the village people to

charge their torch batteries which they can use to access remote locations such

as community toilets later into the evening. This has also reduced the cost of

batteries for these households.

• In the future, the forest department is planning to add facility for electric

grinding and promote other economic activities.

The Ministry of New and Renewable Energy has focused its attention on renewable

sources and has recognized the contribution of watermills in providing a sustainable

source of energy in hilly regions. The existing talent pool of the Engineering department

and research institutions can chip in by upgrading the existing watermills and introducing

low cost designs having ease of operations. Flourishing watermills are integral part of our

agricultural economy and cultural heritage. MNRE may need to reassess the approach to

be adopted to target identified clusters for watermills. The role of state agencies is very

important.


70

5 Recommendations / learnings specific to

programme implementation on SHP Scheme

Based on the review of key issues, field survey and stakeholder consultations, the

following recommendations are provided to MNRE.

5.1 Policy Targets & Planning

5.1.1 MNRE to prepare actionable SHP plan

The State Govt. should submit the annual SHP development plan to MNRE every year.

The annual SHP development plan to provide details on the expected new SHP projects

& capacity (in MW) proposed to be allocated, under-construction project (with status of

project), expected projects to be commissioned in the financial year, number of sites to

selected for resource assessment/DPR preparation, sites proposed to undertake

renovation & modernization, number & capacity of water-mills to be supported. The

Ministry should examine the annual SHP development plan and finalize the budget

allocation (advance expected for current year, plan for subsequent years) for State

specific development of SHP projects.

5.1.2 Cluster based power evacuation infrastructure development for regions having high SHP potential

Power evacuation infrastructure is emerging as a major issue for development of SHP

projects, mainly in hill states. Power evacuation in certain regions is impacting

operational as well as planned SHP projects. It is important that MNRE identify sites

having high SHP potential, but getting impacted by power evacuation infrastructure

issues.

For this it is proposed a detailed technical study should be undertaken to identify the

power infrastructure requirement for clusters where new installation can be encouraged

till year 2022. It is important to identify the investment requirement and preparing a

phase wise plan. Once the clusters are identified, MNRE should provide incentive in the

form of grant to state agency/utility for development of the power evacuation

infrastructure in clusters having high SHP potential.

5.2 Incentive scheme for SHP

A. Type of Incentive

SHP sector has witnessed slowdown in terms of capacity in last few years. The sector is

facing issues related to increase in capital cost. In a number of cases, the SERCs

determined capital cost (on lower side) is having high variation in comparison to the

CERC determined capital cost. It can be inferenced that the tariff increase has not

aligned with change in capital cost. The SHP projects results in development of rural

economy and is one of the focus technology segment contributing towards the

achievement of 175GW target by year 2022.

MNRE plays an important role in triggering the SHP development, given the fact that the

SHP potential is available in remote areas.

It is proposed that the incentive for the SHP projects shall be continued.

Capital subsidy shall remain the preferred option for incentive disbursement.

The capital subsidy shall be defined as a % of actual project cost or CERC

benchmark capital cost, whichever is lower. In the scheme, MNRE should clearly


71

define the maximum cap in the form of Rs Lakh per MW as well as Rs Lakh per

project.

B. Responsibility for subsidy management

It is proposed that MNRE should only define the guidelines for SHP and water mill

subsidy disbursement and the responsibility for subsidy application evaluation & subsidy

disbursement shall be done a government agency.

The key options than can be considered by MNRE for subsidy management are:

Option Remarks

1 State Nodal

Agency

Most of the project related approval & clearances are

undertaken at State level. Given the understanding of the

key requirement & status of SHP projects, SNAs can be a

potential option for subsidy management.

Subsidy can be allotted upfront to State Agencies based on

the annual SHP plan to be shared by States. Will provide

clarity to states and also responsibility for subsidy

disbursement.

2 IREDA

IREDA is a Public Limited Government Company established

in 1987, under the administrative control of MNRE to

promote, develop and extend financial assistance for

renewable energy and energy efficiency/conservation

projects

IREDA has required expertise in subsidy/incentive

management in RE sector. IREDA has managed wind/solar

GBI disbursement for MNRE.

3 SECI

SECI to assist the MNRE and function as the implementing

and executing arm

SECI has required expertise in subsidy/incentive

management in RE sector.

The MNRE should focus on policy design, defining guidelines, facilitating resolution of key

SHP sector issues. The subsidy disbursement/management can be given to a

government agency, reviewing application for subsidy, approval for subsidy based on the

compliance with the guidelines laid down by MNRE. Majority of the supporting required

for subsidy approval application are linked with State agencies or lenders.

It is important that MNRE should provide the subsidy upfront at the start of financial

year to the responsible nodal agency for subsidy management.

C. Pattern of subsidy release

It is proposed that MNRE may disburse subsidy in three tranches under Scheme to

support for setting up new SHP Projects in the private / co-operative /Joint sector. The

current subsidy disbursement is as below:

First Installment: The developer is required to inform the Ministry about

placement of orders for electro-mechanical equipment, disbursement of 50%


72

of term loan & achievement of 50% progress on the project to consider for

release of first installment of financial support.

Second Installment: For release of second installment of financial support, the

developer would further inform the Ministry of successful completion of the

project, fulfillment of performance guarantee tests/ testing & certification of

performance, physical inspection of the project and the commencement of

commercial generation.

The developer would send monthly generation report to the Ministry

after start of commercial generation till the time the project attains

80% of the quantum of generation for the corresponding months as

envisaged in the DPR for a minimum of three consecutive months or

80% annual cumulative generation whichever is applicable. The

developer would also provide proof of energy generation such as

certificate from SEB/Power Transmission Corporation/Company etc.

regarding purchase/wheeling of power. In case of grid failure, the

documentary proof from the SEB/Power Transmission

Corp./Company/Utility should be attached.

At this stage, the Fl would submit a certificate to the Ministry that the

project is not a "non-performing asset" (NPA) and the developer is not

a defaulter. In case, the developer is a defaulter/NPA as per the Fl

norm, he will not be eligible for the financial support.

For the release of second installment, it is observed that due to uncertainty in

resource availability on annual and monthly basis, several developers have requested

to review the requirement for 80% generation for the corresponding months for

three consecutive months. Unavailability of water (even on annual basis) results in

delay for undertaking performance testing, which further delays subsidy

disbursement.

Given the fact that the developer has fulfilled requirement of performance guarantee

tests/ testing & certification of performance, physical inspection of the project, the

commencement of commercial generation; tranche of subsidy can be released on

achievement of these requirement as the project meets the technical requirements

specified by MNRE. On achievement of 80% of the quantum of generation

requirement, a third tranche of subsidy can be released separately without linking it

with satisfying the technical standards requirement at the stage of COD.

The proposed recommendation for three tranche based subsidy disbursement under

Scheme to support for setting up new SHP Projects in the private / co-operative /Joint

sector is:

First Installment: Disbursement of 50% capital subsidy on disbursement of 50% of

term loan & achievement of 50% progress on the project to consider for release of

first installment of financial support.

Second installment: Disbursement of 30% on successful completion of the project,

fulfillment of performance guarantee tests/ testing & certification of performance,

physical inspection of the project and the commencement of commercial generation.

Third installment: Disbursement of 20% when project attains 80% of the quantum of

generation for the corresponding months as envisaged in the DPR for a minimum of

three consecutive months or 80% annual cumulative generation whichever is

applicable

The total financial support, for project set-up by the developer fully through its own

resources, will be released directly after successful commissioning of the project :


73

First installment: Disbursement of 80% on successful completion of the project,

fulfillment of performance guarantee tests/ testing & certification of performance,

physical inspection of the project and the commencement of commercial generation.

Second installment: Disbursement of 20% when project attains 80% of the quantum

of generation for the corresponding months as envisaged in the DPR for a minimum

of three consecutive months or 80% annual cumulative generation whichever is

applicable.

D. Extension limits under scheme

It is proposed that MNRE may consider the following provisions from the perspective of

extension limits under Scheme to support for setting up new SHP Projects in the private

/ co-operative /Joint sector from the perspective of its eligibility for subsidy from MNRE.

Maximum extension It is proposed that the MNRE to provide maximum time limit to

which the extension can be provided for SHP project. The below option can be

considered.

o The SHP project shall achieve the COD within a defined time limit (say 4/5

years) from the date of achievement of financial closure. In case of failure of

SHP project to achieve COD within the defined time limit, the project shall

become ineligible for capital subsidy.

o In case the SHP project is set-up by the developer fully through its own

resources, the SHP project shall achieve the COD within a defined time limit

(say 4/5 years) from the date of signing of implementation agreement with

the State Govt./Agency. In case of failure of SHP project to achieve COD

within the defined time limit, the project shall become ineligible for subsidy.

Grace Period: a grace period of 12 months can be provided for the commissioning of

project from the original schedule date of commissioning as indicated by the

developer in his application ONLY due to natural calamities and for any other

unforeseen reasons for delays during execution of project. It is proposed that MNRE

through assistance from AHEC shall clearly list the “unforeseen” reasons clearly in

the guidelines to remove any ambiguity on project eligible for grace period.

E. Eligibility Criteria

Under the current scheme, “the request on application form along with documentary

proof, for the grant of financial support for SHP project, complete in all respect from the

developer should be submitted to the Ministry within six months from the

commencement of project work at the site or within six months from the date of first

disbursement of loan from the Financial Institution / Bank whichever is earlier”.

The scheme links the eligibility with commencement of project work at site. It is

proposed that the definition of the “commencement of project work” at site shall be

clearly defined. This condition can be linked for projects not raising any loan. For

projects raising loan, the milestone can be linked only with date of first disbursement

of loan from the Financial Institution / Bank to provide greater clarity in the

guidelines.

Alternate option can be that the request on application form along with documentary

proof, for the grant of financial support for SHP project, complete in all respect from

the developer should be submitted to the Nodal Agency within six months from the

achievement of financial closure of the SHP project.


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F. Separate incentive for State agencies to encourage timely commissioning

of SHP projects

One of the key issues with SHP project development has been state level facilitation to

quickly close issues related to approval & clearances. In order to encourage State

agencies (SNA/Utility) to facilitate speedy investment, it is proposed that MNRE should

provide incentive to State agencies. The following can be considered in this respect:

State Agency (SNA/Utility) eligible for subsidy based on the timely installation of SHP

projects within scheduled commissioning timelines. MNRE to fix maximum time limit

for commissioning after signing of implementation agreement for eligibility of

incentive.

Incentive to be disbursed as INR per MW (can be benchmarked with evacuation cost

considered by SERCs on per MW basis).

Incentive to be disbursed to State agency (SNA/Utility) after commissioning of SHP

capacity.

MNRE to manage incentive disbursement to State agencies.

State agency should provide a comprehensive SHP yearly plan detailing project

pipelines, project specific issues, steps taken, commissioning status, cancellation of

projects allotted to non-serious players & dates.

5.3 Institutional Strengthening

One of the major issues related to the implementation of SHP projects is involvement of

multiple agencies and lack of coordination between the agencies. In absence of a

centralized monitoring system, it is difficult for MNRE to keep track of SHP project

development across different states on regular basis, identifying key issues and taking

policy decisions to resolve bottlenecks in a timely manner.

It is proposed that MNRE should develop a web tool/application to provide a single point

integrated platform to support SHP development across states.

The tool/application shall provide clarity on checklist and data inputs required from

developers, status of application, instructions/alert to state agencies (SNA, Utilities,

other State & central agencies as applicable) on action required & processing, output

reports & additional information to support installation.

The application will provide a transactional platform for all stakeholders to process

the requests from developers and aid in the implementation and monitoring of SHP

projects across different States.

Database of projects and project developers – map information related to sites

allocated, developed, status of progress –

o generate unique ID for both project developers and projects – map parent

company/owners, past history (developed, cancelled, delayed)

The tool should cater to MNRE as well as State agency requirements:

o State agencies have limited capacity, hence MNRE should support State

Agencies in development of IT tool/application to assist states in end to end

project monitoring, covering the following elements:

Project Registration

Project allocation

Status of project – implementation, approval & clearances

o To facilitate project registration for subsidy/incentive, evaluation of

application, monitoring of project status and release of subsidy/incentive


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The developer should be mandated to provide details on project status regularly so

that same information is available for MNRE and State agencies for review.

The application/tool can have the following features:

o Online Submission of Application Forms: To provide interface for data entry

for registration of Applicants for installation of SHP projects

To provide interface for data entry, customized as per approved format

To validate Applicant data as per requirement.

To have add/edit, view, save, and submit, print options.

To provide login user, password for each new entry. Multiple user type

login to be provided – MNRE, SNA, Discom, STU, local agencies, AHEC,

Financial Institutions. Access levels to be defined as per user type.

To provide facility for online printing of filled application form.

To be customized for different user types with features like auto-

reminders, filter checks for data, approval/rejection.

The application service provider is required to customize as per the

requirement of State policy framework at state level. MNRE part of the

tool to be common across all States.

o Report Generation

Project Report generation covering following areas: Technical,

Financial, Approval status map for MNRE, Approval status map for

State Agencies, Subsidy disbursement status wherever applicable,

Installation, Post Installation details, AHEC performance testing status

etc. A consolidated report based on all the areas shall also be

developed.

To design Reports generation /tables/ graphs as per various

parameters. The final number, parameters, and type of reports, the

design and structure to be finalized by State agencies for aspects

related to State.

o SHP developers to provide annual generation details in the application. This

shall be made mandatory for developers availing subsidy.

o The IT application/tool shall cater to both with subsidy or without subsidy

based SHP projects.

MNRE should fund the development of the IT tool/application and adequate training &

capacity building can be provided to State agencies, SHP developer associations,

AHEC etc. For initial one year of implementation, MNRE can support an IT cell to

facilitate streamlining of the IT application roll-out. From a sustainability perspective,

MNRE can evaluate a government institution to be responsible for maintaining and

upgrading the IT tool/application.

The figure below details an indicative overview of the expected IT tool/application

process map:


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5.4 Scheme for Water mills

From the survey analysis, it is clear that watermills provide a sustainable source of

livelihood however their competitiveness is reducing due to various factors. New scheme

must address this by building capacity at local level and target specific development

initiatives which can increase adoption of watermills and keep watermill owners

competitive.

The recommendations are as follows:

1. Enhance awareness at local level for water mill projects through increased

engagement of local state agencies and community.

2. MNRE to incentivize proactive engagement of state agencies with local community

members in disseminating information on procedures and benefits of taking up

water mill projects.

3. MNRE to explore better watermill runner designs which can operate efficiently

under low and variable flow conditions.

4. Asses best possible ways to resolve issues related to lack of resource due to SHPs

coming upstream.

5. Proposed scheme for net metering can be designed which can help watermill

owners create savings from surplus electricity post consumption. This can also

incentivize traditional watermill owners to upgrade to electric watermills or install

a hybrid system.

6. Incentives to state agencies can be provided for implementing new business

models which increase incomes of watermill operators e.g. acting as channel

partners for sale of watermill grinded flour which is usually considered as more

nutritious and has good demand in urban areas.

7. Training centers should identified in each state to facilitate ongoing initiatives for

spreading awareness and implementation of watermill programs.

8. Watermill operators reported that the cost of construction has increased over the

years. CFA for micro hydel power plant should also be increased with a

comparatively higher CFA level for north eastern states considering the high cost

of construction there.

9. Scheme should mention specific incentive to be given to state agencies for

identification of new watermill development/upgradation sites. Ministry should

further specify clear targets for state agencies in consultation with them and tag

incentives to achieving capacity milestones as well i.e. no. of watermills

commissioned from total target.


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10. Standard guidelines for preparation of watermill project document should be

issued for state agencies to follow. The submission process can be brought online

through IT tool implementation.

5.5 Support for setting up of Micro hydel projects upto 100 kW

capacity

MNRE to continue providing financial support for micro hydel project upto 100 kW

capacity

MNRE should give priority to rural/remote areas, especially off-grid and mini-grid for

encouraging implementation of micro hydel project upto 100 kW capacity.

5.6 Resource Assessment

Under existing scheme, the Ministry provides financial support for the overall estimation

of potential of SHP projects in a State, identification of new potential SHP sites and for

the preparation of Plan for systematic SHP development including environment impact

assessment etc., in the State. The Ministry also supports specialized studies for remote /

border areas to prepare plans for setting up Micro Hydel Projects (MHPs) in such areas

and strengthening of data base for potential SHP sites. These studies are supported on

case to case basis.

In order to further strengthen the resource assessment initiatives, the following is

proposed:

MNRE should strengthen database for resource assessment/hydrological data. For

this MNRE should reassess/evaluate the small hydro potential in the country on

regular basis (every 3 years).

Online databank: MNRE should to create a credible online databank for hydrological

data. For this, MNRE can consider the following :

Reassess/evaluate the hydro potential in the country to harness the hydro -

potential on low head and ultra-low head sites including existing SHP Projects

Tie-up with CWC to provide long term hydrological data for potential sites

Hydrological data vetted by competent authority will assist in development of

good DPR.

AHEC has shown interest in assisting with initiatives on data collection given

proper financial and institutional support through MNRE R&D or sector

capacity building initiative. Specific pockets/clusters in key states can be

targeted first under an initiative.

MNRE to use IT tool to monitor actual CUF of SHP projects – mandatory for

projects supported through subsidy

SHP Potential to be categorized for mapping the ease of harnessing the potential –

this can be done by defining the attractiveness of potential based on: nearest power

evacuation infrastructure, access road, water availability, forest land etc. The

categorization shall result in ranking the SHP sites based on their attractiveness. This

will assist MNRE in targeting clusters having high attractiveness to meet the SHP

capacity addition target.

Standardization of SHP DPR preparation: MNRE to take initiative to standardize the

DPR preparation process and enhance quality of DPRs. Online tool proposed to be

developed by MNRE can be used for standardization of DPR preparation and having

appropriate checks & balances to check quality of DPR. This can be supported by


78

online training modules to developers on preparation of DPRs, apart from technical

consultants.

o MNRE to develop a tracker on sites funded for DPR preparation, agency

preparing the DPR and monitoring the final parameters after commissioning in

comparison to the DPR values. This will ensure MNRE in monitoring quality of

DPR prepared by different agencies/institutions. SHP projects availing subsidy

can be mandated to provide details in the form of a checklist detailing DPR

value and actual value, after commissioning of project.

o MNRE to undertake initiative with respect to empanelment of consultants for

DPR preparation to facilitate developers.

5.7 R&D and Human Resource Development

It was observed that training and capacity building can greatly enhance profitability and

quality of a project for long term sustainability of the plant as well as the sector in

general. SHP sector if facing issues related to increased capital cost, high O&M etc. The

research and development initiatives shall support the sector in addressing the key

issues.

The recommendation to enhance R&D and capacity building efforts are as follows:

1. Develop network of regional centres of excellence to support development of SHP.

AHEC has been at the forefront of SHP research in India.

o MNRE can further assist AHEC to tap other institutions in the country to

coordinate with various Institutions/Centers of Excellence including those by

other Ministries/ Organizations, and the R&D projects funded by the Ministry

with the aim of facilitating their work, bring about synergistic networking and

explore translation of R&D work to commercial deployment. At least, one

institution in each region should be identified to spearhead the R&D and

training initiatives with AHEC providing the guiding framework.

2. Development of Online training modules & courses: Most of the trainings are carried

out at AHEC in its turbine simulation lab which provides hands on experience on

managing a power plant which is essential. Given the dispersed nature of SHP

potential across different States, other training programs such as on resource

assessment, DPR preparation, silt management etc can be provided through optional

online/e-learning training modules. E-learning modules have benefit of being

scalable, efficient and fast, maintaining consistency, saves time and money. The e-

learning modules shall be developed on dedicated platform/Learning Management

Systems.

o MNRE through AHEC shall prepare e-learning module on focus areas like DPR

preparation, construction & installation, O&M, technical standards etc.

Specialized courses for technicians can be taken up to meet the requirement

of skilled manpower for field installations and O&M.

o Online certification courses can be developed by AHEC.

o MNRE to explore potential of providing access to e-learning modules to other

countries to enhance partnership in SHP segment.

3. Clear roadmap for R&D and Capacity building: MNRE to undertake a detailed study

and consultations to identify the thematic areas for R&D and training capacity

building. MNRE should prepare a detailed roadmap for undertaking activities in the

next 3 years. The focus areas shall include the below :

Laboratory Facilities

Testing & Certification


79

Technology Commercialization : focus on cost reduction (capital cost , O&M),

implement pilots to assess feasibility of existing Ultra Low Head turbine

technologies at tail races of SHPs & encourage commercial models.

MNRE should support dedicated commercialization programs through

PPP route.

MNRE can also tap into the incubation cells across research &

educational institutions in India to commercialize new technologies.

Knowledge Services & Capacity building

Enhance International and National Industrial Research Collaborations

4. MNRE to support research initiatives focused on evaluating long term economic

impacts of climate change on hydrology and SHP projects.

5. AHEC may be strengthened with regard to their capacities and resources, both

human and financial, and it should be made a guiding star for the sector with

sufficient technical, financial and functional support and autonomy.

5.8 Regulatory Interventions

Inter-state transmission charges exemption

National Tariff Policy (amendment) has provided waiver in inter-state transmission

charges and energy losses for transmission of Solar and Wind Power. SHP projects are

reliable RE source and encouraging inter-state trade shall assist SHP developers. It is

proposed that MNRE shall review this with MOP to evaluate providing the same benefit to

SHP projects.

Capital Cost benchmarking

Capital cost considered by a number of SERCs is lower than CERC values and the

developers are requesting for the same. It is important to ensure regulatory push to

consider the cost variations while determining tariff for SHP projects.


80

6 Annexure 1 : Project Survey Details

6.1 List of SHP Projects surveyed

State Project Name District Type of Power

Plant

Commissioning Year

Total (kW)

1 Uttarakhand Bhilangana-III SHP

Tehri Gharwal ROR 2011 24000

2 Uttarakhand Sarju-2 Bageshwar ROR 2016 12600

3 Uttarakhand Loharkhet Bageshwar ROR 2008 4800

4 Uttarakhand Badyar Hydro Electric Project

Uttarkashi ROR Aug-14 4900

5 Uttarakhand

Regency Gangani Energy Pvt. Ltd.

Uttarkashi ROR 2013 8000

6 Uttarakhand Sarju 3 Bageshwar ROR 2014 10500

7 Himachal Pradesh

Beas Kund Kullu ROR 2012 9000

8 Himachal

Pradesh Beas Kullu ROR

Under

Construction -

9 Himachal Pradesh

Hurla SHP Kullu ROR Under Construction

3000

10 Himachal Pradesh

Aleo - II Kullu ROR 2014 4800

11 Himachal Pradesh

Jirah SHP Kullu ROR 2011 4000

12 Himachal Pradesh

TOSS SHP Kullu ROR 2008 10000

13 Himachal Pradesh

Baragaon Kullu ROR 2015 24000

14 Himachal

Pradesh Dikleri Chamba ROR 2013 2000

15 Himachal Pradesh

BINVA IV (Bhavani Renewable

Energy Pvt. Ltd.)

Kangra ROR 2013 4000

16 Himachal Pradesh

Lower Baijnath ROR 2009 1000

17 Himachal Pradesh

Neogal II Kangra ROR 2014 4500


81

State Project Name District

Type of

Power Plant

Commissioning Year

Total (kW)

18 Himachal Pradesh

Neogal Kangra ROR 2013 15000

19 Himachal Pradesh

Iqu-II Kangra RoR 5000

20 Himachal Pradesh

Sumez SHP Rampur RoR 2014 14000

21 Himachal Pradesh

Ascent Hydro Rampur RoR 2012 4500

22 Himachal Pradesh

Kurmi Rampur RoR 2014 8000

23 Kerala Adyanpara Malapuram ROR 2015 3500

24 Kerala

Meenvallom

Small Hydel Projects

Palakkad ROR 2014 3000

25 Kerala Raniperunad Patthanamthita ROR 2012 4000

26 Kerala Kariyakayam Patthanamthita Dam 2013 15000

27 Kerala Vellathoval small hydro project

Idukki ROR 2016 3600

28 Kerala Iruttukanam Small Hydel Project

Idukki ROR 2012 4500

29 Telengana Bravo Suryapeta Canal 2013 1200

30 Telengana Kalavapally Suryapeta Canal 2016 750

31 Telengana Malyalappaiah Suryapeta Canal 2014 900

32 Punjab SKR Bhatinda Canal 400

33 Punjab Poohla Bhatinda Canal 2014 600

34 Punjab Bowani 1200

35 Punjab Sidhwan Hydro Ludhiana Canal 2014 700

36 Punjab Bharowal Ludhiana Canal 2013 750


82

State Project Name District

Type of

Power Plant

Commissioning Year

Total (kW)

37 Arunachal Pradesh

Khet MHS Tawang ROR 2012 100


Thinbu MHS Tawang ROR 2012 100


Tsechu MHS Tawang ROR 2012 100


Zhangdonggrong

West Kameng ROR 2013 1000


Rahung West Kameng ROR 750


Dirang West Kameng ROR 2000

43 Karnataka Baje MHS Udupi ROR 2015 3800

44 Karnataka Yennahole I MHS

Udupi ROR 2014 15000

45 Karnataka Mulibettu MHS Dakshin

Kannada ROR 2015 10500

46 Karnataka Aramedanahalli MHS

Hassan Canal 2013 1500

47 Karnataka Sai Nireeha Power Project - Kattepura MHS

Hassan ROR 2013 5000

48 Karnataka Igglur MHS Ramanagara ROR 2015 1500

49 Karnataka Suvarnamukhi

MHS Ramanagara ROR 2014 2000


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6.2 List of SHP Projects surveyed

S.No. State Project Type District Capacity(kW)

1 Uttarakhand Electro Mechanical Harsila 3

2 Uttarakhand Electro Mechanical Sarigad 3

3 Uttarakhand Mechanical Kyara 3

4 Uttarakhand Mechanical Bandawali 3+2

5 Himachal Pradesh Mechanical Chamba 3

6 Kerala Electrical Palakkad 2



9 Kerala Electrical Chinnar 7.5


84

7 Annexure 2 : Approval timelines

Case – Himachal Pradesh Approval Timelines (Upto 5 MW)

Step Details

Application for

Allocation

• Application shall be accepted on the prescribed format

and should have accompanied the application fee &

requisite documents.

• The application shall include along with the application

the information regarding, name of the stream/nallah,

estimated capacity, assessed head and assessed design

discharge, layout sketch of the Project.

Issuance of

Consent Letter

• If the project is approved for allotment to a particular

applicant, consent letter for exclusive time bound right

for preparation of Detailed Project Report (DPR) for the

Small Hydro Electric project shall be issued.

Submission of

Feasibility Report

• IPP shall submit a comprehensive Feasibility Report (FR)

to Himurja prepared by a reputed consultant within six

months of issuance of this letter along with the

credential of the consultant.

• Extension of three (3) months subject to deposition of

extension fee @ Rs 10,000/- per MW per month is

allowable. If the IPP fails to submit Feasibility Report

within extended period project is liable to be cancelled.

Feasibility Report

Approval

• Himurja will approve the Feasibility Report within two

months from its submission or within 11 months

(including extension obtained for submission of

feasibility report if any) from the issue of consent letter

Grant of

Technical

Concurrence,

preparation &

submission of

documents for

signing of

Implementation

Agreement.

• Technical Concurrence shall be accorded by Directorate

of Energy (DoE), on behalf of the Government within 45

days from the date of receipt of the Detailed Project

Report or within 28 months and 15 days from the date

of issuance of Consent Letter and also complete all

formalities for signing of IA

Confirmation of

Interconnection

Point

• Two months after the approval of FR

Signing of IA • Within 15 days of accordance of TC or within 29 months

from the issuance of Consent Letter


85

Achieving

Financial closure

including PPA if

required and

work started

Concurrent

action: Any

balance

clearances,

consent/approval

• IPP has to achieve the financial closure including PPA, if

required and obtain balance clearance/consent/approval,

if any and start work on site within six (6) months after

signing of IA or within 35 months

Project

Commissioning

• Project must be commissioned within 24 months from

the date of start of work - six (6) months extension in

this period is allowable for valid reasons

Source – Himurja

Case – Himachal Pradesh Approval Timelines (above 5 MW)

Step Details

Identification of site

• Either Private developer to identify else state to

identify and notify the list of potential sites across

Himachal Pradesh river beds

• Project proposal submission by perspective bidders

within a stipulated time is scrutinized by nodal

agency (Dept of Energy) and approval is from

Government of HP

Project allotment

• Project allotment follows notice inviting tender

route, department notifies about the SHP

development scheme

• Allotment on the basis of tentative installed

capacity as mentioned in NIPs through Competitive

Bidding Route

Signing of MOU

• Submitting a of 50% of fee at the time of MOU

signing

• Security deposit process to be finished within 30

days of signing of MOU

Compendium of

hydrological data,

topographic survey

and feasibility project

• One year from signing of MOU

NOCs of IPH, HPPWD, Revenue, Fisheries and Wild Life are not required. However, clearances and compliance of norms & conditions of the departments shall be ensured by the developers before and during execution.


86

Power evacuation

• Point of interconnection, evacuation envisaged by

company to happen within one year of signing of

MOU

Submission of DPR • 24 months from signing of MOU

Signing of

Implementation

agreement (IA)

• 42 months from signing of MOU

Submission for TEC/

Statutory/Non-

statutory

Clearances/Land

Acquisition

• Within 8 months of signing of IA

Obtaining govt

approvals

• Within 10 months from date of Submission of

Proposals by Company

Financial Closure /

Signing of PPA / Start

of construction work

• Within 24 months from date of signing of IA or 6

months of obtaining Clearances/ Approvals,

whichever is earlier

Project Commissioning

• As per Techno-economic Clearance of the DPR

Handing over of

Project to Government

• 40 years after Scheduled COD


87

Case – Uttarakhand Approval Timelines (above 2 MW and up to 25 MW)

Step Details

Project Allocation

Process

• State government to identify and notify the

potential small hydro projects in various river

valleys

• Shall prepare the DPR and submit to GoUK for

approval (no timeline mentioned for govt approval

on DPR)

• Project developer selection based on bidding

(premium route)

Issuance of LOA

• Government to provide LOA to the perspective

selected bidder for development of SHP (no

definitive timeline mentioned)

Signing of

Implementation

Agreement

• Implementation agreement to be signed off within

45 days*

• From LOA issuance for a total period of 40 years

Approval and

clearances

• Private developer to obtain all necessary clearances

and approvals regards to Forest, Environment,

PWD, Irrigation (no clear timeline mentioned) – 20

months from signing of IA

Financial Closure • Private developer to obtain financial closure within

20 months of signing of IA


• Project Developer to obtain project commissioning

i.e. charging and performance monitoring

certificate within 5 years from the date of signing of

IA

Case – Uttarakhand Approval Timelines (upto 2 MW)

Step Details

Application for

Allocation

• The Nodal Agency shall be responsible for

identifying the potential sites and prepare the

Detail Project Report (DPR) for the development

of MHP sites.

Approval of Application

• The proposal received within stipulated time frame

from the bidder shall be scrutinize and shortlisted

by the Technical Appraisal Committee (TAC) (21

days)*


88

• The allotment of the project to the successful

bidder shall be done by the Project Approval

Committee (PAC)

Issuance of LOI

• Nodal Agency would issue the letter of allotment

(LOA) to the successful bidder for submission of

security amount and signing of Implementation

Agreement (IA)


• The Project shall be completed and made

operational within a period of 36 months after

financial closure of the project.

Signing of

Implementation

Agreement

• Nodal Agency/GoUK will sign the Implementation

Agreement (IA) with the successful bidder within

30 days of issue of letter of allotment (LOA). The

detail of implementation schedule, obtaining

clearances and other related information will be

defined in the IA.

Approval and clearances

• MoEF notification vide 14 Sept 2006, environment

clearance is exempted for mini/ micro projects

• Developer to obtain statuary clearance within 6

months of allotment

Financial Closure • Developer to obtain financial closure within 9

months of letter of allotment

Case – Karnataka Approval Timelines

Step Details

Application for

Allocation

• Application may be submitted in the prescribed format

(downloadable from kredlinfo.in) and should be

accompanied with the application fee (Application fee of

10,000 Rs./MW + Tax) & requisite documents.

• The application shall include along with the application the

Pre-feasibility Report, Topo sheet, information regarding

land etc.

• Net worth of the company, certified by CA, shall be at least

30% of the total project cost.


89

Scrutiny of

application

• Initial scrutiny by KREDL against its checklist.

• Letter will be addressed to Forest Department (to ascertain

the availability of land if it is lies in Forest area), Krishna

Bhagya Jala Nigam Ltd (KBJNL) (if the project comes under

limits of KBJNL), Water Resources Development

Organization (WRDO) (if the project comes under vicinity of

Cauvery Basin) and Karnataka Power Corporation Limited

(KPCL) (if the project comes under vicinity of KPCL

projects).

• After receiving the clearances, proposal will be sent to

Government of Karnataka for placing it before the

Allotment Committee headed by The Additional Chief

Secretary/Principal Secretary, Energy Department,

Government of Karnataka.

Project

Allotment

• Govt. order for allotment issued, stipulating various terms

and conditions and timelines.

Signing of

agreement

• Signing of agreement between Developer and Govt. and the

payment of DPR processing fee (1,00,000 Rs./MW + Tax)

and refundable security deposit (1,00,000 Rs./MW + Tax)

• Agreement specifies more detailed terms and conditions of

allotment.

Obtain all

statutory

clearances

• Project Developer shall obtain all statutory clearances from

authorities such as WRD Dept., Forest, Ecology &

Environment Dept., KPTCL, KPCL, PCB, Revenue Dept. etc.

Submission of

DPR for

technical

clearance

• DPR shall be submitted within one year from date of

execution of agreement for technical clearance from

KREDL.

Financial

closure

• Financial closure to be achieved within 6 months of receipt

of technical clearance for the DPR

Project

commissioning

• The time line for implementation of the project will be 5

Years from the date of Government Order of allotment.


90

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evaluation of small hydro power (shp) programme of mnre

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