The year 2016 has been an eventful year for the power sector with positive government initiatives such as the UDAY scheme, Deen Dayal Upadhaya Gram Jyoti Yojna (DDUGJY) and Integrated Power Development Scheme (IPDS). All these reforms announced are expected to have a long term positive impact on the sector, making it more efficient and profitable and also ensuring 24×7 power supply for all. Further, the mandatory use of smart metering solutions and emphasis on other energy efficient measures will help improve operational efficiencies in the sector.
The demonetisation reform by the government will hit the unorganised sector in the electrical equipment space, positively impacting business prospects for branded players. Apart from this, passing of the GST bill will improve business efficiencies of individual companies, while also creating an overall environment which promotes ease of doing business in the country.
The hydro sector continued to perform dismally in 2016. There was a capacity addition of only 320 MW from April to October 2016. Investors continued to stay away and there were no new projects. The 12th plan hydro addition target is 10,897 MW of which only 4140.4 MW has been realised.
The UDAY scheme was a good step to help and bail out ailing SEBs but only a handful of state governments aligned with the scheme. Further, the Viability Gap Funding initiative of the government was a good step to push projects towards completion, specifically for those where progress was mired by cost over runs. This step is expected to reduce selling tariffs. Going forward, we expect that the hydro policy in 2017 will include hydro projects under 100 MW size in the renewable category. Further, hydro purchase obligation (HPO) and renewable purchase obligation (RPO) could see a take-off in 2017. If the initiatives are not taken seriously, we could expect a totally dead hydro sector in India in 2017.
The year gone by saw overall small hydro lagging in developing projects and developers have been eagerly awaiting support from the Central government. Land acquisition and forest clearance continues to be a challenge for the industry. We hope that the government will announce special packages for the small hydro sector like single window for forest clearance and land acquisition, allocation of resources for priority funding of small hydro projects and off take arrangements of power from these projects. Our company is looking at acquiring under development projects in 2017 to achieve its target of 300 MW in hydro by 2020. The company has tied up the equity funding for the two projects under development in Arunchal Pradesh, and Infra Co Asia Development Pte Ltd has invested US$ 5 million in the projects towards development activities. Pre-construction infrastructure development works have started and our company is targeting 2019 as the year of commissioning for the projects.