Interview with Tarun Kapoor

Additional Chief Secretary, Multi-purpose Projects and Power, Non-conventional Energy Sources, Forest, Environment, Science and Technology

“Our main focus will be on small-hydro”

Himachal Pradesh has significant small-hydro power (SHP) potential but delays in obtaining clearances (pending for 10-20 years in some cases), high capital costs and several other issues have been discouraging hydropower players from investing in the state. In a candid interview with Renewable Watch, Tarun Kapoor, additional chief secretary, multi-purpose projects and power, non-conventional energy sources, forest, environment, science and technology, discusses the steps being taken to resolve the various challenges…

The state government recently made amendments to the hydropower policy. Will these help address the concerns of developers and fast-track SHP projects?

Projects are getting delayed due to two key reasons. First, the construction of hydroelectric stations involves a lot of clearances and, even after the clearances come through, project construction faces a lot of challenges because the local people have huge expectations and at times stall project work. Second, while project costs have gone up, tariffs have gone down, making it financially unviable to undertake such projects. As far as the first issue is concerned, we have to ensure that projects get clearances fast. To this end, we are holding meetings with developers and going through each project to find out why it is stuck and are trying to solve the problems. Regarding financial viability, since the costs have gone up, the state government has decided to make certain financial provisions for these projects. We have decided that the 12 per cent free power clause can be deferred. Second, the tariff would be decided based on the date of commissioning and not the date of signing of the agreement. This is because some project agreements were signed 10-12 years ago when the tariff was Rs 2.50 or Rs 2.40 per unit. Today, the tariff has increased to Rs 3.40 per unit and those projects are still not ready. If the project is set up at such low tariffs, its viability would be questioned. Thus, banks are not lending money for projects. We will be following up on every project so that the construction time is reduced. Interest forms a very large component of the project cost and sometimes accounts for 25-30 per cent of the total cost. If a project is delayed and takes, say, 10 years to build, you can imagine where the project cost would go at an interest rate of 13-14 per cent. Therefore, if we can ensure that projects are constructed on time, it would help significantly. Normally, small projects should get completed within three years while larger projects should not take more than five years. Developers should try to complete projects faster so that their interest burden is reduced. The other problem that developers face relates to power transmission. We are trying for transmission lines to be built in time to enable the timely evacuation of power. We are trying to evacuate power through the existing network wherever possible. There are some projects that are under construction under the central government’s green energy corridor scheme; these projects have to be expedited. All these steps have encouraged developers to come forward and seek help not only for expediting existing projects, but also for setting up new projects in the future. We will be allotting more projects through the competitive bidding route.

Investors or developers allege that panchayats often demand up to Rs 10 million per MW, for hydropower projects. How can such issues be resolved?

Developers have been paying money to panchayats, which is not correct. Sometimes local people and panchayats demand money. This is not legal. I have been telling developers to not pay anything other than what has been approved under the government’s resettlement and rehabilitation plan. The government already has a provision for a local area development fund and there is a set rate for developers, and they should pay in line with that rate. As for settling issues with the local people, developers should approach the local administration and not start settling these issues themselves as they can get into trouble. We are also going to raise the issue with deputy commissioners and ask them to intervene in problems so that the norms that have been set are followed. The system that has been spoilt by some developers needs to be corrected.

How is the issue relating to the selling of power by hydropower producers within and outside the state being resolved?

The government recently took a decision that power from projects up to 25 MW would be procured at generic time. This is a good thing. Now, developers of up to 25 MW project capacity have an assured sale outlet. Other than that, developers are free to go for captive sale, they are free to sell to other distribution companies, or to an industry or a large consumer directly under open access. For selling outside the state, the main issue pertains to transmission, which calls for open access, which we are facilitating. The government has also decided that for captive consumption, developers will be allowed to wheel power on the state’s network without any wheeling charges. We have also requested the central government  to waive the charges for SHP plants for interstate transmission, like it is for solar. If that happens, power generated in Himchal Pradesh could be exported to any other state at very little extra cost. Even if the developers are able to sell at Rs 4-Rs 4.50 per unit, it would earn very good returns for them. The Himachal Pradesh government has decided to give 10 per cent subsidy for rooftop solar installations in the state, in addition to the subsidy provided by the Ministry of New and Renewable Energy (MNRE).

Not many people are opting for rooftop solar. Is this due to lack of awareness?

Currently, domestic consumers going in for rooftop solar installations can avail of a 60 per cent subsidy from the MNRE, and a state subsidy of Rs 4,000 per kW. This is a substantial amount. For the commercial sector, there is no subsidy but for government buildings, there is 70 per cent subsidy from the central government. As far as government buildings are concerned, we have set a target of about 2.5 MW just for Shimla, and another 2.5 MW will be installed in other places. An additional 5 MW will be installed on other buildings, including in the domestic sector. I think we will be able to get this much demand, which is in line with the target set by the Government of India for the state. The main issue is that the connectivity procedure is a bit complicated and people do not know much about it. Also, the time involved is very long. Recently, I was told that the central government has set up a website wherein a person can apply for connectivity with the grid and get approved developers to install their rooftop projects. From the Himachal Pradesh State Electricity Board’s side, we will make the procedures simpler so that it can be done without much hassle. Apart from 1,300 lights for the slum areas and the installation of a few 15 kWp and 20 kWp solar PV plants, not much has been done under the solar city programme in Shimla. Hamirpur is almost a non-starter.

What are the provisions for solar promotion under the Shimla Smart City programme?

Under the solar city programme, plans were prepared for both the towns and, these had to be executed under various existing schemes of the central and state governments. However, the progress has been slow. As per the budget available under the smart city programme, there is provision for solarisation of certain government buildings and public establishments. There is also some provision for solarisation under the Integrated Power Development Scheme (IPDS)  and some work is being done under it. These two cities are majorly covered under the IPDS. If these three schemes eventually converge, a good amount of solarisation would take place in these two cities. Hamirpur has to also be covered under the existing schemes. This year, HIMURJA has taken up the task of installing solar projects on government buildings. Two districts where we have seen good response are Una and Sirmaur. We will set up rooftop solar systems on government buildings in these two places.

Do you think there is scope for harnessing wind energy in Himachal Pradesh?

There are hardly any good sites where wind density is high in Himachal. We had proposed the setting up of a wind-solar-battery-SHP plant close to Kaza to supply power to that area. This project was approved by the MNRE and tenders were called. The bids became very high only because of the wind component, as developers thought that the transportation of wind equipment would be very expensive. The proposal has since been amended and wind has been kept out of the new draft. The new project will comprise solar and battery elements, to be integrated into an existing small hydel plant. We have resent the proposal to the centre and we will surely implement it once it is sanctioned. Other than that, I do not think we will be able to set up a wind-solar hybrid in the state.

What about biomass cogeneration in Himachal Pradesh? Only 8.7 MW has been achieved so far. Is there any scope for developing this segment further?

There is not too much scope on the biomass cogeneration front, except that some waste-to-energy (WtE) plants can be set up. One plant exists in Shimla, though it is not running as it has problems. The government is now making certain amendments. We are proposing eight new WtE plants, but we will leave the technology selection to the developers. One plant is under construction in Manali,  while another plant  is being bid out in Baddi. Hopefully something will work out.

Are there any other new initiatives being looked at in the renewable energy space in Himachal Pradesh?

For Himachal Pradesh, our main focus will continue to be on small-hydro. We may also try floating solar if it turns out to be viable as the state has several reservoirs.

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