The Union Cabinet, led by Prime Minister Narendra Modi, has sanctioned the Ministry of Power’s proposal to provide Central Financial Assistance (CFA) totaling Rs. 4,136 crore to North Eastern Region (NER) state governments. This funding will support their equity participation in developing hydroelectric projects.
According to the official statement, these projects will be carried out through Joint Venture (JV) partnerships between state entities and Central Public Sector Undertakings (CPSUs). The scheme will be active from FY 2024-25 to FY 2031-32 and aims to develop a cumulative hydro capacity of around 15,000 MW. It will be financed through 10 percent Gross Budgetary Support (GBS) allocated for the NER from the Ministry of Power’s overall budget. The Ministry plans to establish a JV company for each project involving a central PSU and the respective state government.
The CFA provided to the NER state governments’ equity stake will be capped at 24 percent of the total project equity, with a maximum limit of Rs 750 crores per project. This cap may be reviewed on a case-by-case basis. The equity ratio between the CPSU and the state government in the JV will be maintained when disbursing the grant. CFA will only be granted to viable hydroelectric projects, with states expected to either waive or stagger free power and/or reimburse SGST to ensure project viability.
This initiative aims to boost state governments’ involvement in hydro development, facilitating a more balanced distribution of risks and responsibilities. By including state governments as stakeholders, the scheme is expected to mitigate issues related to land acquisition, rehabilitation, resettlement, and local law and order, thereby reducing potential project delays and cost overruns.
The scheme is anticipated to be instrumental in tapping into the hydropower potential of the North East, drawing significant investment to the region, and creating substantial direct and indirect employment opportunities in sectors such as transportation, tourism, and small-scale businesses.
Furthermore, the development of these hydroelectric projects will support India’s Nationally Determined Contribution (INDC) target of achieving 500 GW of renewable energy capacity by 2030 and will enhance the national grid’s flexibility, security, and reliability through the integration of renewable energy sources.
To overcome challenges in hydropower development, the Government of India has introduced various policy measures. Notably, on March 7, 2019, the Cabinet approved initiatives to advance the hydropower sector, including classifying large hydro projects as renewable energy sources, implementing Hydro Power Purchase Obligations (HPOs), rationalizing tariffs with escalation, and providing budgetary support for flood moderation and essential infrastructure such as roads and bridges.
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