MNRE Cancels Proposal for Central Financial Assistance to 53 Small Hydro Projects

The Ministry of New and Renewable Energy (MNRE) has issued a notification announcing the cancellation of 53 proposals submitted to the Ministry for central financial assistance (CFA) for small hydropower projects (SHP) in the private sector.

Majority of these projects are located in Karnataka followed closely by Himachal Pradesh.

The ministry has decided not to extend financial assistance to these projects owing to non-compliance of the provisions contained in the administrative approval of the program as was communicated in its earlier letters dated July 29, 2003, and December 11, 2009.

The MNRE has in its circular further conveyed that it would not entertain any further correspondence in this regard, as the project developers had not submitted any progress report of their project execution after submission of application for providing CFA.

In 2017, Mercom had reported about the MNRE’s advisory to developers of small hydro projects stating that central financial assistance may be at risk due to lack of reporting.

According to the MNRE, 134 developers had submitted applications in 2014 for financial assistance, but none had provided project development updates and progress reports. In a letter addressed to the developers, MNRE had stated, “It is understood that a SHP project can take two to three years to develop, but a lack of communication regarding progress status can lead to a project being barred from availing CFA.”

Minister for Power, R.K. Singh had recently declared the state-wise CFA that was released in 2018-19 (until February 5, 2019). According to Singh, in total, the government has released around ₹35 billion ($505 million) in CFA for renewable energy projects across India. Central Financial Assistance provided by the Government of India is being utilized to support energy projects across solar, small hydro, wind, biomass, and waste to energy through capital subsidy or generation-based incentives.

Small hydro projects have minimal effect on the ecology and topography of an area. Small hydro projects are cost-intensive, and huge returns are guaranteed in the long run. Moreover, the capacity utilization factor is high when compared to other sources of renewable energy. Thus, government agencies are providing financial and technical support to escalate the development of small hydro projects in India.

According to Mercom India Research and CEA’ data, small hydropower projects accounted for over 1.28% of India’s total installed capacity and 6% among renewable energy capacity as of March 2019.