Himachal Pradesh to Monetise Free Hydropower

The Himachal Pradesh government has decided to monetise the annual 438 MW of free power it receives from the Nathpa Jhakri and Rampur hydropower projects in the Sutlej basin near Rampur by selling it through power trading. The decision was approved by the state Cabinet at its meeting held on December 30.

Under the new arrangement, the free power will no longer be supplied to the Himachal Pradesh State Electricity Board (HPSEB). Instead, it will be traded by the Directorate of Energy, which has been designated as the Energy Management Centre to undertake power trading activities.

The move aims to generate additional revenue for the state exchequer while bringing greater transparency and efficiency in the management of free power accruing from large hydropower projects. Until now, HPSEB had been utilising this free power to supply electricity to consumers across the state. The government believes that market-based trading will yield better financial returns and help strengthen the state’s fiscal position.

Relief for Small Hydropower Projects

In another significant decision, the Cabinet approved major relief for hydropower projects below 25 MW capacity by rationalising the levy of free power as royalty. More than 500 small hydropower projects in the state are expected to benefit from this move.

Earlier, these projects — including those that had already signed Implementation Agreements (IAs) — were required to pay enhanced royalty ranging from 12 to 30 per cent, in addition to a one per cent contribution to the Local Area Development Fund (LADF). Power producers had raised concerns that the high levies had rendered many projects financially unviable.

Acting on the recommendations of a Cabinet sub-committee headed by Revenue and Horticulture Minister Jagat Singh Negi, the Cabinet approved amendments to the Swaran Jayanti Energy Policy-2021. Under the revised policy, all eligible projects — irrespective of whether they have signed IAs — will now pay a uniform 12 per cent free power royalty along with a one per cent LADF contribution.

The state government expects the rationalisation to unlock investments worth nearly ₹20,000 crore and accelerate work on several stalled hydropower projects. However, the relaxation will not apply to projects that have already been commissioned or those where Power Purchase Agreements (PPAs) have been executed with HPSEB.

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