The Union Cabinet, led by Prime Minister Narendra Modi, has approved a proposal from the Ministry of Power to provide Central Financial Assistance (CFA) to State Governments in the North Eastern Region (NER) to support their equity participation in the development of Hydro Electric Projects. These projects will be undertaken through Joint Ventures (JV) between State entities and Central Public Sector Undertakings (CPSUs).
The scheme has a financial outlay of ₹4,136 crore, to be implemented from the fiscal year 2024-25 through 2031-32, aiming to support the development of approximately 15,000 MW of hydroelectric capacity. Funding will come from the Ministry of Power’s budget, specifically allocating 10% of the Gross Budgetary Support (GBS) for the North Eastern Region.
The Ministry of Power’s scheme includes forming JV companies for each project, involving both Central PSUs and State Governments. The central grant for the State Government’s equity portion will be capped at 24% of the total project equity, up to a maximum of ₹750 crore per project, with the possibility of revisiting this cap on a case-by-case basis. The equity ratio between the CPSU and the State Government in the JV will be maintained when disbursing the grant.
CFA will be provided only for viable hydroelectric projects, with states required to waive or stagger free power obligations and/or reimburse SGST to ensure project viability. This initiative aims to encourage State Governments’ participation in hydro development, leading to a more balanced sharing of risks and responsibilities. It is expected to reduce issues such as land acquisition, rehabilitation, resettlement, and local law and order problems, thereby minimizing project delays and cost overruns.
The scheme is set to play a crucial role in harnessing the hydro power potential of the North East, attracting significant investments, creating numerous direct and indirect employment opportunities for locals, and promoting entrepreneurial ventures in related sectors. Additionally, the development of hydroelectric projects will contribute to India’s goal of establishing 500 GW of renewable energy capacity by 2030, enhancing the flexibility, security, and reliability of the national power grid.
The Government of India has introduced several policy measures to address challenges in the hydro power sector. Notably, in March 2019, the Cabinet approved steps such as designating large hydro power projects as Renewable Energy sources, setting Hydro Power Purchase Obligations (HPOs), implementing tariff rationalization measures, and providing budgetary support for flood moderation in storage hydroelectric projects and for infrastructure like roads and bridges.
