Impediments in Development

The main barriers/concerns that have come in the way of development of hydropower projects are briefly discussed below.

1. Longer gestation period and capital intensive nature of the projects: Preparation of detailed projects reports (DPRs) for hydropower projects takes relatively longer period than for thermal projects because reliable hydrological, geological, seismological and environmental studies have to be carried out for a longer period. Thus hydropower projects generally entail a long gestation period. In addition to this, these projects are comparatively capital intensive. In the context of resource shortages and continuing power shortages, thermal projects (coal, liquid fuel and gas), which need a relatively short gestation period, have been getting priority in fund allotments.
2. Dearth of good contractors: A matter of concern in the execution of large projects is the dearth of competent and resourceful contractors, as it often results in time and cost overruns of hydro projects. Inter-state aspects: A large number of hydropower projects having common river systems between adjoining states are held up on account of inter-state aspects. Some of these projects have received the techno-economic clearance (TEC) of CEA but the investment sanction could not be accorded due to inter-state aspects. A number of projects have also not been accorded CEA clearance on account of inter-state issues.
3. Environmental impact and rehabilitation issues: Important environmental concerns in hydro-electric projects are: (a) rehabilitation of project-affected people; (b) deforestation; (c) likely submergence of archaeological, religious and historical monuments; (d) protection of flora, fauna, forests, and wildlife; (e) degradation of catchment area; and (f) disaster potential in the event of earthquakes, reservoir induced seismicity, surplusing of reservoirs, etc. Rehabilitation of project-affected people is also a major issue in implementation, especially in case of storage-based hydro development. It is essentially a human problem and has to be dealt with understanding and sensitivity. In fact, many times it is one of the main reasons for the delay in the execution11 of projects. Sardar Sarovar, Indira Sagar, Bansagar Tons and Tehri are some of the hydro projects where the progress had been severely hampered in the past from sustained opposition to project construction by environment activists and project-affected people.
4. Valuation of forestland based on net present value: The manner of valuation of forest land diverted for non-forestry purposes based on the net present value (NPV) of diverted land has been a matter of concern for developers of hydropower projects. As per the recommendations of a Centrally Empowered Committee (CEC), the NPV of forestland diverted for non-forest use has been charged at Rs5.80−9.20 lakhs per hectare, depending upon the density of forest involved. Under NPV, the state government has to pay to the CEC the NPV of forestland lost to mining and other projects, including resettlement. State governments, in turn, have asked for exemption in case of projects such as government hospitals, schools, and rainwater harvesting meant for public welfare. In some cases, it is argued that loading of NPV on the project may result in increase in tariff of hydro-electricity.11 There is thus an urgent need to rationalize NPV calculations of forestland in case of hydroelectric projects. The matter had also come up before the Supreme Court of India, which has directed the formation of a committee to look into various issues pertaining to assessment of NPV. The Energy and Resources Institute is also undertaking a study to analyze various aspects of NPV calculation for hydroelectric projects in India.
5. Law and order problems: Disturbed law and order is one of the factors causing delay in project execution and even suspension of work. Some of the hydropower projects affected due to these problems are Dulhasti, Upper Sindh, Doyang and Dhansiri.
6. Land acquisition problems: The problems arising in acquisition of land for hydropower project are causing suspension and delay in the construction activities. Thein Dam, Doyang, Ghatgar pumped storage plants are some of the projects affected in the past due to this problem.
7. Geological surprises: The features of the hydropower projects being site specific, depend on the geology, topography and hydrology at the site. The construction time of a hydro project is greatly influenced by the geology of the area and its accessibility. Even when extensive investigation using new techniques of investigations are undertaken, an element of uncertainty remains in the sub-surface geology and the geological surprises during actual construction cannot be ruled out. This in turn adds to the construction risks.
8. Power evacuation: A number of the hydropower projects are located in remote sites and the home states do not have adequate demand. Timely provision of power evacuation system presents many complexities in such cases, since (a) the beneficiaries are to be identified well in advance, and (b) where there are serious right-of-way constraints, excess capacity would have to be built in one go considering likely future development of projects in the evacuation corridor. This could result in high transmission tariffs initially and also adversely affect sustainability of the project in case of slippages in projects. These issues are especially relevant in case of projects in NER.
9. Lack of private sector interest: The private sector has also not been evincing much interest in taking up hydro projects in view of non-availability of adequately investigated projects, construction risks, etc.
10. Tariff and regulatory issues: The existing tariff formulation norms for hydro projects (based on a cost plus approach) with no premium for peaking services and the provision for 12% free power13 to distressed states from the initial years are also proving to be deterrents. Small hydro segment: Development of small hydro often suffered due to inaccessibility of the sites, lack of power evacuation infrastructure, investigation and construction difficulties, land acquisition and financing difficulties, inadequacies in institutional support and in some cases law and order problems.