High on potential, low on execution

Recently, Prime Minister Modi asked Niti Aayog to submit a report on stalled hydropower projects in the country. Maybe this is a factor of India committing to create 175 gigawatts of renewable energy by 2022 and possibly being unable to meet its goal.

Hydropower is considered a source of renewable energy despite concerns about the ecological damage and methane emissions caused by it. Small hydro projects (less than 25 MW) can offer better alternatives to big dams which submerge thousands of acres displacing people and impacting environment. Though such issues are also associated with small hydropower projects, they still have a greater potential to deal with energy deficiency of an area through transparent, participatory approaches. A CAG report, however, reveals slow progress on small hydropower. 

Targets and achievements

Delayed land and forest clearances, negligence of contractors, improper monitoring, and inaction against defaulting developers are resulting in time and cost overruns. The Ministry of New and Renewable Energy (MNRE) had aimed to install about 7,000 MW by 2017 when the 12th Five Year Plan will end but as of March 2014, only 19 percent of the total potential sites had been exploited. Most of the potential is in the Himalayan States as river-based projects, and in other States as irrigation canals.

Forest and environment clearances besides land acquisition continue to be main reasons for the delay in executing projects. In Karnataka, for instance, the state government allotted 167 projects in Western Ghats, which is the eco-sensitive zone. In Uttarakhand, only 15 percent of the work on the 250 kW project at Gauri Chhina (Pauri) was completed. There was also a delay of two years in the transfer of forest land even though the Uttarakhand Renewable Energy Development Agency had assured the MNRE that no forest land was involved at the site at the time of seeking central financial assistance of Rs 0.93 crore. As many as 13 projects which were to be constructed on a public community participation mode had not been completed due to lack of interest and poor coordination of sharing partners, which resulted in funds of Rs 6.51 crore being blocked.

Slow on survey, quick on grants

The audit found a large number of projects that had been commissioned and reported as a part of installed capacity, but were either not functioning or functioning sub-optimally. One of the reasons often quoted for bad performance of a project was lower water flow than estimated. However, states had themselves to blame for poor planning. For instance, in Himachal Pradesh, potential sites were identified only on the basis of preliminary reconnaissance and no system existed to assess power potential accurately. Due to this, there was a variation of 40 to 1,300 percent in the capacity allotted, and the actual capacity addition through various projects. 

In Ladakh, contractors were allotted 17 mini hydro power projects for development without ascertaining the status of land of identified sites, taking environmental, forest, irrigation and land clearances. The implementing agencies incurred an expenditure of Rs 41.987 crore on these projects without acquiring the land and obtaining technical approval. Test checks in five States found 60 projects shut down, under repairs or working below capacity leading to loss of power generation and revenue. 

In Arunachal Pradesh, 11 projects with a capacity of 275 kW and constructed at a cost of Rs 4.17 crore, were rendered non-operative after villages were connected to the local grid. The energy systems were neither redeployed to other needy places nor connected to the local grid for continuous operation. 

Undue favour to developers

The public exchequer suffered a loss because of undue favours to project developers. The hydropower policy of Himachal Pradesh calls for additional premium and free power if the capacity of the project below 5 MW is enhanced. However, four developers did not deposit Rs 3.90 crore as capacity addition charges even after the lapse of more than seven to nine years.

In addition, four developers did not deposit Rs 4.87 crore towards local area development fund for environmental management plan, catchment area treatment plan, compensatory afforestation etc. 

In Madhya Pradesh, three developers did not pay the commitment fee of Rs 1 lakh per MW after migration to the new policy. None of the developers paid a project performance guarantee of Rs 1 lakh per MW aggregating to Rs 2.67 crore but no action was taken against them. In Bihar 15 projects had not been commissioned even after a delay of 37 to 88 months and incurring an expenditure of Rs 128 crore.

The CAG has recommended that MNRE should release the central financial assistance to developers only after all the clearances are obtained to avoid time and cost overruns. Frequent review of all the projects which are held up or are underperforming can also solve specific problems.