3. Financing of Disaster Mitigation Management in Power Sector – NHPC Perspective

Frequency and severity of natural disasters such as floods, earthquakes, droughts, landslides and storms are increasing worldwide posing a serious threat to the development process. Increase in its impact is partly due to economic growth and increasing world population dwelling in exposed area. Any disruption in Power System affects human life and economy of the country badly. However, loss of equipments, Generation, Transmission and Distribution System in case of a disaster, cost heavily to Power Sector organisations dealing with that and they have to bear it mostly on its own resources and funds. Among Power Sectors, Hydro Power Sectors, Transmission & Distribution Sectors are more affected to natural and other type of disasters. Insurance is one of the ways to finance the rehabilitation process. However, many corporate sectors manage their losses by having captive insurance policy. NHPC, a leading Hydro Power Generation Company in India, was following the policy of getting its projects insured. But with the experience it has learnt that the hefty amount spent towards insurance premium does not commensurate with the losses incurred/recovered. Hence it has adopted the policy of captive insurance and has raised a reasonable reserve till date. This paper deals with general aspects and need of financial mechanism in Power Sectors in the first part and the case study of NHPC regarding Self Insurance Policy, a Corporate Funding Route for Financing of Disaster Management in second part.