the river and the val­ley

Tap­ping hydropower in­vest­ment op­por­tu­nity in the up­per In­dus basin in Jammu and Kash­mir

Governance Now - - CONTENTS - Simi Thambi and Shakil A Romshoo

Tap­ping hydropower in­vest­ment op­por­tu­ni­ties in the up­per In­dus basin in Jammu and Kash­mir

The in­dus has im­mense hydropower po­ten­tial which has mostly re­mained untapped. The geo­graphic lo­ca­tion of the state of Jammu and Kash­mir gives it a unique ad­van­tage to har­ness hydropower from the three ma­jor rivers. as Jammu and Kash­mir hosted its first global in­vest­ment sum­mit for hydropower in July, in­vestors from around the world are eye­ing up this untapped in­vest­ment op­por­tu­nity.

al­most 100 per­cent of the state’s in­stalled ca­pac­ity comes from hydropower. This is less than 15 per­cent of the es­ti­mated 20,000 MW hydropower po­ten­tial of the state and there­fore there is huge scope for har­ness­ing the re­main­ing 85 per­cent of the hydropower po­ten­tial. The state’s en­ergy de­mand has in­creased over the last five years at an an­nual rate of about 5-6 per­cent. Ev­ery year it faces a power deficit in the range of 20-25 per­cent which is much higher than the na­tional av­er­age of 3 per­cent.

The pri­mary rea­son why the state has been un­able to use its wa­ter re­sources for bridg­ing its en­ergy deficit is lack of fi­nances. In­crease in joint ven­tures and pub­lic-pri­vate part­ner­ships can give the re­quired mo­men­tum for stream­ing in the ben­e­fits of hydropower gen­er­a­tion in the state. not only will this di­rectly im­prove the state’s power deficit, it will also have wider reper­cus­sions on the so­cio-eco­nomic de­vel­op­ment of this re­gion.

any wa­ter in­fra­struc­ture de­vel­op­ment on the in­dus river in the state is guided by the in­dus Wa­ter Treaty (IWT) signed be­tween in­dia and Pak­istan in 1960 with the World Bank as the guar­an­tor. The treaty re­serves the western rivers (Jhelum, chenab, and In­dus) for Pak­istan ex­cept for spe­cific use by in­dia for var­i­ous pur­poses in­clud­ing ir­ri­ga­tion, do­mes­tic use, runof-river hydropower gen­er­a­tion and other non-con­sump­tive uses sub­ject to the con­di­tions of de­sign, wa­ter stor­age etc. clearly set out in the treaty. The two coun­tries have off and on got em­broiled in dif­fer­ences over the de­vel­op­ment of wa­ter in­fra­struc­ture on the in­dus, par­tic­u­larly hydropower pro­jects.

To ad­dress such con­cerns, there is a trans­par­ent and vi­brant dispute res­o­lu­tion mech­a­nism in the treaty. Both the coun­tries have in­voked this mech­a­nism from time to time. For in­stance, when Pak­istan re­cently ob­jected to the hydropower gen­er­a­tion on the western rivers by in­dia, par­tic­u­larly Bagh­liar and Kis­hanganga pro­jects, the mat­ter was re­solved as per the pro­vi­sions of the treaty. re­cently, a few im­por­tant con­cerns about shar­ing of in­dus wa­ters be­tween the two coun­tries have also come to the fore and th­ese in­clude cli­mate change im­pacts, melt­ing of glaciers, ground­wa­ter ex­ploita­tion, wa­ter qual­ity, and min­i­mum en­vi­ron­men­tal flows. The two coun­tries share th­ese com­mon con­cerns but are ad­dress­ing them on their own within their ter­ri­to­rial bound­aries. There is a need for a joint mech­a­nism to ad­dress them in or­der to op­ti­mise the im­pact of their mit­i­ga­tion plans.

given the en­vi­ron­men­tal vul­ner­a­bil­ity and eco­nomic con­straints of the re­gion, har­ness­ing the en­tire iden­ti­fied hy­dro po­ten­tial by pro­mot­ing large

Given the en­vi­ron­men­tal vul­ner­a­bil­ity and eco­nomic con­straints of the Jammu & Kash­mir re­gion, har­ness­ing the en­tire iden­ti­fied hy­dro po­ten­tial by pro­mot­ing large hy­dro pro­jects may not be a good strat­egy. In­stead, the state could go for small pro­jects gen­er­at­ing up to 25 MW.

hy­dro pro­jects may not be a good strat­egy. The state has a huge po­ten­tial for small hy­dro pro­jects (SHP) in the cat­e­gory of pro­jects up to 25 MW. small, mi­cro or mini hy­dro pro­jects are more en­vi­ron­ment-friendly com­pared to large and medium hy­del pro­jects as they have min­i­mal reser­voir re­quire­ments and civil con­struc­tion work. Nowa­days, fi­nan­cial in­sti­tu­tions (FIS) are also not very ea­ger to fi­nance large and medium hy­dro­elec­tric pro­jects for a host of rea­sons, es­pe­cially due to the long ges­ta­tion pe­ri­ods and slow re­turn on heavy ini­tial cap­i­tal in­vest­ment. as a re­sult, un­til now only 3,263.46 MW has been ex­ploited in the state.

The state has a po­ten­tial of more than 1,500 MW for small hy­dro pro­jects (up to 25 MW), but the achieve­ment with re­spect to har­ness­ing it has been par­tic­u­larly dis­mal. To pro­mote this source, last year the state came out with a small hy­dro pol­icy. its ob­jec­tive is to lay down a frame­work for the op­ti­mum har­ness­ing of hydropower re­sources of the state and to pro­mote en­trepreneur­ship and pri­vate sec­tor in­vest­ment so that small hydropower can be pro­moted as an at­trac­tive eco­nomic en­ter­prise. The Jammu & Kash­mir gov­ern­ment is ac­tively en­cour­ag­ing small hydropower pro­jects to en­sure that the de­vel­op­ment of this sec­tor serves as an en­gine for pro­mot­ing the all-round de­vel­op­ment of the re­gion.

un­like large hy­dro pro­jects, SHP pro­jects do not have a long ges­ta­tion pe­riod; so they can be quickly used to meet the power de­mand. The pol­icy of­fers sev­eral fis­cal and fi­nan­cial in­cen­tives for in­vestors, like in­come tax ex­emp­tion and en­try tax or sales tax ex­emp­tion on ma­chin­ery re­quired for ini­tial in­stal­la­tion or main­te­nance of th­ese pro­jects. in ad­di­tion, the depart­ment of in­dus­trial pol­icy & pro­mo­tion also un­veiled a fresh set of in­cen­tives in June to en­cour­age new in­dus­trial units and ex­ist­ing in­dus­trial units in­volved in hy­del power gen­er­a­tion for the pe­riod up to 2022.

While con­sid­er­ing the fund­ing pro­pos­als, the Fis, be­sides other vi­a­bil­ity fac­tors, sat­isfy them­selves on their con­cerns about the power pur­chase agree­ments. at 30 per­cent com­mit­ment of power pur­chase un­der the SHP pol­icy, it will not be dif­fi­cult for the in­de­pen­dent power pro­jects to sat­isfy the Fis on their loan re­pay­ment ca­pac­ity. in ad­di­tion, there is also scope for ad­di­tional prof­its to be de­rived from the clean de­vel­op­ment mech­a­nism. All th­ese ef­forts will en­able in­vestors to loosen their purse strings. in fu­ture, one can def­i­nitely ex­pect a high tide for hydropower de­vel­op­ment, par­tic­u­larly small hy­dro pro­jects, in the state of Jammu and Kash­mir.

Thambi is a Young Pro­fes­sional in the En­ergy and Cli­mate Change Ver­ti­cal of NITI Aayog. Ramshoo is the Head of Depart­ment of Earth Sciences, Univer­sity of Kash­mir. The views ex­pressed are per­sonal.

Creative Com­mons

In­dus River near Leh

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