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Hydro Power Development in Nepal: Related Regulatory Issues in India, Shri R V Shahi, Former Secretary, Ministry of Power

Indian power sector profile, as we know, is heavily weighted in favour of coal based power generation. Some three decades ago, the proportion of hydroelectric capacity was more than 40%. This provided a more comfortable structure to take care of both peak and off peak demands. However, in the last 30 years, as we all know, the massive capacity additions, through coal based thermal power plants, have changed the proportion drastically. Even though there was a marginal increase during the Tenth Five Year Plan, hydroelectric capacity is only 26% of the total installed capacity. In terms of electricity generation, in fact, this is hardly about 18%. Government of India, through 50,000 MW Hydroelectric Initiative launched in 2003, made a major effort towards substantial increase in the capacity of hydro electric plants. This is, however, taking time because of the inherently long gestation periods of these projects, from the time they are identified for detailed investigations till commissioning. Emphasis in development of hydroelectric potential in India, which is of the order of 150 GW, is not only essential to take care of the heavy imbalances in the peak and off peak loads, but also it is imperative from the point of view of global warming.

The Integrated Energy Policy projects a total installed capacity of more than 800 GW by the year 2032. Even if entire hydroelectric potential of the country, which is 150 GW, is fully harnessed this will constitute less than 20% of the total installed capacity. No doubt, during this period there would be major changes in the proportions of nuclear power which is now less than 3% and may rise to about 7%, and marginal improvement in the proportion of new and other renewables, yet, fossil fuel might retain the dominant position. India is committed to keep the Co2 emission at a level which may not be more than average of industrialised nations. However, unless we also explore other possibilities and work on other options, the promise of keeping the green house gas emissions within the limits mentioned above in the next 25 years may be difficult. In this context, two major strategic interventions might prove very effective in fulfilling, if not fully, to a great extent, the desired goals. These are - (a) jacking up further the targets of nuclear capacity, and (b) definite actions on harnessing hydroelectric potentials in India as also in the neighbouring countries.

On the basis of estimates made so far, Nepal has a hydroelectric potential of the order of 83,000 MW. Many experts believe that all the rivers, rivulets and water streams have not been fully investigated and assessed. The actual potential may be much higher than 83 GW. Similarly, Myanmar is, as per the estimates, having a potential of the order of 40 GW and Bhutan of the order of 30 GW. Thus, the total potential in these three countries in the South Asian Region is about 150 GW, equal to the estimated potential in India. If all these potentials are harnessed, proportion of hydroelectric capacity could radically change. It is not the point that hydroelectric potentials of these countries, when harnessed, would all be available to India. These countries themselves would need to enhance their energy generation and consumption. It would, however, be reasonable to assume that even after satisfying their domestic needs, they would have more than 50% balance to offer to India. If this is made to happen, the whole profile of renewable energy will not only present a more comfortable scenario, but, the position of this region, in terms of its concern for climate change, would stand vindicated and enhanced.

Nepal has notified a Hydro Power Policy which aims at development of hydro projects through foreign investments. The Authorities in Nepal are conscious of the fact that around, and on the basis of, hydroelectric projects not only can they enhance electricity generation but they will be able to transform their economy in the larger interest of the people of Nepal. They have the economic upliftment of Bhutan, achieved in last ten years, in mind. Bhutan's income is contributed, to the extent of almost 65%, by the hydroelectric power produced in this country, as a result of which the average per capita income of Bhutan is now more than that in India. Obviously, Nepal having a much larger hydroelectric potential should legitimately feel and expect that if all these potentials are harnessed their income levels would increase radically, besides substantial electricity becoming available in the country will propel economic activities for over all development. If they are able to export power to India revenue earned will help in creating infrastructure and support other social schemes and activities. For India, substantial amount of power could be available after meeting the domestic needs of Nepal.

In response to the Hydro Power Policy of Nepal a number of public and private sector companies have shown interest. More than a dozen of these companies have become active. Some of them have been given what is called the first stage licence by the Nepal Government. This licence enables them to carryout investigations and prepare Detailed Project Report (DPR). Though, the first stage licence does not necessarily mean that after the DPR has been prepared, the same agency will definitely be allotted the project to execute, yet, the general understanding and expectation is that these agencies will be given second stage licence also to implement the projects. From the available information, it is found that about 4,000 MW capacity spread over a number of projects has been allocated in terms of first stage licence. Seeing the response, it may be expected that more agencies will get interested and will also get engaged in development of hydro power projects.

Recently, I had the occasion to interact with a few agencies which are engaged in the initial activities relating to investigations and preparation of DPR's. They have a number of concerns, just as developers in India also have number of issues, in relation to land acquisition, connectivity to the site, environmental clearance, forest clearance and security etc. Obviously, these issues will need to be addressed by the appropriate authorities and agencies in the Government of Nepal. Since, it is in the interest of Indian power sector that these projects get implemented speedily, it may be desirable that at the Government level, through the intervention of Indian Government and Indian Embassy, an institutionalised arrangement is put in place which regularly provides the required handholding and trouble shooting support.

Apart from the assistance and support that these project development companies would require in Nepal from Nepal Authorities, there are a few Policy and Regulatory issues which would require to be addressed in India. In absence of these, financial closure might not only be difficult but virtually impossible and many of these projects may end up becoming non-starters. A few important Policy and Regulatory issues which need immediate attention by the Ministry of Power, Ministry of Water Resources and Central Electricity Regulatory Commission in India are briefly mentioned below:

  1. Tariff fixation for these projects is the most important issue. As per new Hydro Policy issued by Ministry of Power for projects in our country, 40% of power has been left to be traded, and balance 60% will be sold through long term PPA for which tariff determination will be done by the Regulatory Commission. The Regulatory Commission depends heavily on the techno economic appraisal and concurrence accorded by the Central Electricity Authority. These details facilitate the process of tariff determination. What would be the corresponding arrangement for the hydroelectric projects in Nepal developed by various companies which will sell power in India through long term PPA is an issue which will need careful consideration and decision. Both Ministry of Power alongwith Central Electricity Authority and CERC will need to apply their minds, prepare an appropriate Policy after extensive consultation with various agencies including project developers, so that the developers are in a position to have clarity and lenders are in a position to have confidence to provide debt funding.

  2. Transmission of power to India would be an issue which would be somewhat akin to the problems which are faced even with reference to power projects being developed in different parts of India, particularly hydroelectric projects being developed in hilly States. Issues such as estimation of power flow, nature of transmission system, procedure for requesting and granting Open Access, transmission and wheeling charges etc. will all need appropriate approach and clarity, so that all concerned are confident that power evacuation will be ensured and approximate charges would be fixed on the basis of well established pre-determined Policies.

  3. Will there be an agency to take care of trading of power or different project companies will deal in this matter as they are doing in India? Here again, in consultation with the Ministry of External Affairs and the Government of Nepal a clear cut set of Guidelines will need to be evolved and notified. Already a number of views have started floating. What is needed is a clear policy guideline.

Apart from the above, there could be a few other issues of minor nature. But the above three issues will need immediate resolution. Perhaps the most appropriate agency to initiate the process is the Regulatory Commission, which could, in the first instance evolve a basic document in consultation with CEA and Ministry of Power as a discussion paper, and subsequently, after consultations with all concerned, could issue the required Policy Guidelines. This is such a subject where the normal process of a party filing the Petition in the Commission may not be the best approach. If, however, there is any reservation on the part of the Central Electricity Regulatory Commission, perhaps the Ministry of Power could initiate the process for each of the above three issues.