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• Hydroelectric energy is a continuously renewable electrical energy source.
• Hydroelectric energy is non-polluting - no heat or noxious gases are released.
• Hydroelectric energy has no fuel cost and with low operating and maintenance costs, it is essentially inflation proof.
• Hydroelectric energy technology is a proven technology that offers reliable and flexible operation.
• Hydroelectric stations have a long life and many existing stations have been in operation for more than half a century and are still operating efficiently.
• Hydropower station efficiencies of over 90% are achieved making it the most efficient of energy conversion technologies.
• Hydropower offers an instantaneous response to changes in load demand. Hydro power is recognized as a renewable source of energy, which is economical, non-polluting and environmentally benign.

• Industrial clearance is not required for setting-up of renewable energy industry.
• No clearance is required from Central Electricity Authority for power generation projects upto Rs. 100 crores (Rs. 20 million).
• A ten year Tax holiday allowed for renewable energy power generation projects.
• Soft loan is being made available through IREDA for renewable energy equipment manufacturing.
• Facilities for promotion of export oriented units are available for renewable energy industry also.
• Financial support is available to renewable energy industries for taking up R & D projects in association with technology institutions.
• Power Project import allowed.
• Private Sector Companies can set up enterprises to operate as licensee or generating companies.
• Customs duty concession is available for renewable energy parts/equipment, including for machinery required for renovation and modernization of power Plants.
• Excise duty on a number of capital goods and instruments in the renewable energy sector has been reduced/exempted.
• However clearances shall have to be taken from Departments like- Forest, HP- PWD, Fisheries, Pollution control Board, Wild Life, Revenue, etc after the morandum of understanding (MOU ) is signed between the Ipp and the State Government.

Foreign Investment Policy

• Foreign Investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and also for setting up of renewable energy based Power Generation Projects.
• Liberalized foreign investment approval regime to facilitate foreign investment and transfer of technology through joint ventures.
• The proposals for up to 74% foreign equity participation in a joint venture qualifies for automatic approval.
• 100 % foreign investment as equity is permissible with the approval of Foreign Investment Promotion Board (FI P B).
• Various Chambers of Commerce and Industry Associations in India can be approached for providing guidance to the Investors in finding appropriate partners.
• Foreign Investors can also set up a liaison office in India.
• Government of India is also encouraging foreign Investors to set up renewable energy based power generation projects on Build, Own and Operate basis.

General Information About Hydro Projects

• A large number of hydro-power development projects with the potential to generate 5 MW each categorised as small hydros have been identified in many States. There is a concentration of such potential in Himachal Pradesh.
• Hydro-power generation is well-established technologically across the globe in diverse geo-physical conditions. It is the cleanest, non-polluting mode of production of electrical energy. The project capacities in hydros range from less than 1 MW to hundreds of MW. With no raw material and feedstock costs, and utilising a renewable natural resource, the hydro-power sector has the inherent advantage of lowest cost of generation.
• Small and medium hydro power stations are collectively major sources of power supply in many countries-Europe, Canada, US, Brazil and South-East Asia. In India, successful execution of smaller hydro capacities has been demonstrated under the UNDP and also by a handful of successful IPPs.
• Hydro-power projects up to 25 MW capacity are eligible for substantial cash subsidy from the Ministry of Non-Conventional Energy Sources. Project income is exempt from tax for ten years. Hydro projects automatically qualify for carbon credits under the Clean Development Mechanism supported by the Kyoto Protocol and similar Emission Reduction Funds.
• These projects have a long concession period of about 40 years and provide a perennial stream of revenue to the investors. The new National Electricity Policy under contemplation would most likely further incentivise hydel power generation and place a stronger thrust on this sector. The entry of the private sector into power trading would push up the demand for hydel generation for its cost advantage and higher trading spreads.

About Himachal Pradesh

• The northern state of India, Himachal Pradesh has a hilly Topography. This state is among the favorite tourist spots in India. The Topography of the state influences the weather which remains more or less pleasant throughout the year. The natural beauty of this region is highly enticing.
• The total area of Himachal is more than 55,673 sq. km. It is surrounded by landforms from all sides. The Topography of the land is mainly hilly. The average altitude of the region ranges from 450 meter and 6500 meter above sea level. The elevation of the state increases from west to east, with climate conditions varying from semi-tropical to semi-arctic.
• The total population of Himachal Pradesh as per 2001 census was 61,77,248 with population density being 93 persons per sq. Km. However, there are wide variations in area and population figures of the districts and district-wise density varies from 2 persons per sq. km. in Lahaul Spiti to 330 persons.
• Electric supply at the time of formation of the state in 1948 was available only in the Capitals of the erstwhile princely states and the connected load at the time was less than 500 kW. Thus the organization of the power utility in the state began relatively recently and first electrical division was formed in August,1953 under the Public Works Department.
• Subsequently a department of M.P.P. & Power was formed in April, 1964 after realizing the need for exploiting the substantial hydel potential available in the river basins.
• The passing of the Electricity Act 2003 (EA 2003) has opened up the possibilities of new markets for electricity generators and this is largely responsible for the confidence of power generators this time around. The EA 2003 aims to create a competitive electricity market in the country, and the central measure for this is Open Access. In the Open Access system, a power generation company can sell power to anyone in the country and not just to the concerned SEB.
• The Developer will be permitted to establish, own, operate and maintain the Project for a period of 40 yrs, extendable by 20 yrs. Thereafter the Project shall revert back to the State Govt free of all encumbrances.
• HPSEB shall purchase Power @ Rs 2.87 / unit.
• The project is applicable for carbon credit approx @ 60 paise / unit.
• HPSEB shall clear all dues on account of purchase of Power within 30 days from the receipt of the Bill, failing which penalty @ 1.5% shall be payable by HPSEB.
• The Project shall be Insured against natural / un- natural calamities.
• Projects above 5 Mw have the option to sell their produce to Haryana / Punjab which purchases at Rs 4 / unit. PPA executed for 1 year at a time so you may decide as to whom to sell.
• Capital Subsidy will be 45% of Project cost limited to Rs 2.25 Crores + 37.50 Lacks per MW extra or the Project may get Interest subsidy, ie:1 Mw gets 7.5 % interest subsidy.
• Promotional Subsidy on cost incurred for carrying out Detailed survey and investigation and preparation of Detailed project Report (DPR) = Rs 3 Lakhs.
• No Tax on Income for 10 Years thereafter 30 % exempted for another 10 years. The Project becomes operational in about 4 to 5 yrs. It takes 3 yrs to : Obtain MOU, measure water level ( measured for 2 lean seasons ) then Detailed Project Report ( DPR ) prepared, Techno Economic clearance taken, Departmental clearances taken, Implementation agreement executed, land derived, Power purchase agreement executed, loan derived. 1 to 2 yrs for construction (depending upon its size).
• 1MW Project produces: 87 lack units / annum in full capacity.
• Full utilization is reached within 5 mins of starting the flow of water.
• Initially cost of generation is high, around Rs 1.50 / unit because interest on loan has to be given to the bank, but every year Income starts rising as burden of interest reduces. When the loan has been returned then cost of generation per unit is around 35 paise.
• As per the old Govt's policy anyone could take on Project of any size, but now as per the new Govt's policy, Projects upto 2 Mw shall be reserved for Himachali's only, therefore very few small projects are available.
• Loan / equity ratio is : 70 / 30 % . Cost per Mw works out to 6 to 7 crores.
• Projects working on 50 % PLF are considered viable.
• Loan can be paid in 3 to 4 years.