Web Exclusive | March 2013
NHPC wants higher returns in hydro projects
Seeking steps to ensure higher returns on investment in hydro projects the government-owned NHPC has approached the Union Power Ministry. NHPC has faced sluggish progress in hydro projects. NHPC, the country's largest hydro power producer, has said that Return on Equity (ROE) for hydro projects is too low to attract investors.
NHPC has said that at a time when energy security has become critical and environmental concerns emanating from the use of conventional fossil fuels are growing, it is ironical that the effective ROE (Return on Equity) on net worth of hydro projects is very meagre to elicit investor interest.
The foremost reason for this precarious situation is the idle equity during the construction period and the construction period in turn is quite long for hydro projects due to the inherent problems, it said in a recent communication to the Ministry.
NHPC has noted that rate of ROE being allowed for hydro sector is not commensurate with the gestation period and associated risk in construction of hydro projects. Most hydro projects have been adversely impacted by geological surprises. Besides, inaccessibility and remote locations and delay in land purchases have also hurt the sector.
NHPC has also requested the Ministry to consider the possibility of amendments to the tariff policy of 2006, to extend much needed policy/regulatory support for promoting hydro sector.