The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved Central assistance to support the development of hydropower projects in the Northeastern Region (NER) of India.
According to a government statement, the Cabinet has greenlit the Union Power Ministry’s proposal to provide Central Financial Assistance (CFA) to state governments in the NER. This assistance will support their equity participation in the development of hydropower projects through joint ventures between state entities and Central Public Sector Undertakings (PSUs).
The scheme, which has an allocation of ₹4,136 crore, will be implemented from FY25 to FY32. It aims to support the development of approximately 15,000 MW of hydropower capacity in the NER. The funding for this initiative will come from 10% of the Gross Budgetary Support (GBS) designated for the North Eastern Region from the Ministry of Power’s total outlay.
Under the scheme, a Joint Venture (JV) company will be formed for each project, involving a Central PSU and the respective state government. Key features of the scheme include:
- The CFA for the state governments’ equity share will be capped at 24% of the total project equity, with a maximum limit of ₹750 crore per project. This cap may be reviewed on a case-by-case basis.
- The equity ratio between the Central PSU and the state government in the JV will be maintained at the time of grant disbursement.
- The assistance will only be provided for viable hydropower projects, with states required to waive or stagger free power and/or reimburse State GST (SGST) to ensure project viability.
The scheme is designed to encourage state government participation in hydropower development by sharing risks and responsibilities more equitably. With state governments as stakeholders, issues such as land acquisition, rehabilitation, resettlement, and local law and order challenges are expected to be mitigated, reducing the likelihood of project delays and cost overruns.
This initiative is anticipated to significantly boost investment in the NER, creating numerous direct and indirect employment opportunities for local residents. Additionally, the development of hydropower projects in the region will contribute to India’s Nationally Determined Contribution (NDC) target of establishing 500 GW of renewable energy capacity by 2030. It will also enhance the flexibility, security, and reliability of the national grid by integrating renewable energy sources.
The Indian government has previously introduced several policy measures to promote the hydropower sector. In March 2019, the Cabinet approved initiatives such as classifying large hydropower projects as renewable energy sources, implementing Hydropower Purchase Obligations (HPOs), rationalizing tariffs, and providing budgetary support for flood moderation and infrastructure development.
India’s estimated hydropower potential from large plants (with an installed capacity of more than 25 MW) stands at 1,33,410 MW, with the NER accounting for 55,930 MW, or around 42% of this potential. However, only a small fraction of this potential has been harnessed, with 2,027 MW currently operational and an additional 5,000 MW under construction. This leaves approximately 87.5% of the region’s hydropower potential untapped, with Arunachal Pradesh holding over 90% of the NER’s total potential.
