61. The Next Wave

Author explores the various avenues of funding available to hydro power projects under development in India. Things appear to be looking up for hydro finance in India. The Power Finance Corporation (PFC), India's leading financial institution in the sector, has proposed the establishment of an India Power Fund (IPF) as an additional source of equity funding for power projects. For the first time, the Washington, USbased International Finance Corporation (IFC), a World Bank affiliate, is reported to be taking up 10% equity in an Indian IPP hydro project. And the federal-owned National Hydroelectric Power Corporation (NHPC) has this year tapped a nontraditional source; insurance funds. To add to the US$552 million loan that it had already signed up with the Life Insurance Corporation of India, NHPC is negotiating a further US$ 1.4 billion of credit, to be drawn over 20 years at a likely 6–6.5% interest rate. Financing hydro projects in India has not been an easy process, particularly in recent years. It has become even more difficult considering the ambitious plans that India has drawn up to expand its power sector in the immediate future. Under the slogan ‘Power For All by 2012’, the federal government wants to double its present installed generation capacity from all sources by adding 100,000 MW by the year 2012 (with matching investments in transmission and distribution). The plan for expansion of the hydro power sector (which currently has a capacity of around 26,000 MW) is even more ambitious. Under an initiative formally launched by the Indian prime minister in May 2003, the aim is to add an extra 50,000 MW of hydro power capacity in 16 hydro-rich Indian states by the middle of the next decade. The necessary funds could amount to around US$ 66 billion).