Financial Assistance Maybe at Risk for Small Hydro Developers Due to Lack of Reporting

August 17, 2017


The Ministry of New and Renewable Energy (MNRE) has issued an advisory to developers of small hydro projects stating that central financial assistance (CFA) may be at risk due to lack of reporting.

According to 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, Dr. P.C. Pant of MNRE states, it is understood that an 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.

So far, only 28 percent of the total hydropower potential in India – out of 148 GW has been developed, according to a report by PwC-Associated Chambers of Commerce and Industry of India (ASSOCHAM).

In an exclusive interview with Mercom, Dr. P.C. Pant said, “As of now, SHP developers can avail CFA of ₹15 million (~$0.23 million)/MW up to a maximum ₹50 million (~$0.78 million) for a 25 MW project. The gestation period of a small hydro project is 5 years and we (MNRE) provide a grace period of one year. Once the project is awarded, the developer has to spend close to two to three years to get the required clearances after which project construction begins.”

A developer is supposed to apply for CFA within six months of starting work or financial closure, added Dr. Pant. Explaining the need of this advisory Dr. Pant said, “This is a chance for all such developers that have defaulted to provide information regarding project progress.”

We want to make the entire process transparent, so there is no hold up of funds. Dr. Pant said, “If the developers provide regular progress updates, it will be helpful for MNRE to increase the grace period projects on its merits. Developers should be proactive – only then we will be able to achieve true potential.

There is a penalty clause for developers who have delayed projects amounting to 5 percent of the CFA per quarter. Currently, developers approach MNRE after project completion, which can be anywhere from five to six years from the date of award and expect financial assistance. If they provide progress updates during the entire process, is will be much more transparent, added Dr. Pant.

According to MNRE, small hydro power accounts ~4.4 GW of cumulative installations as of June 2017.