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India admits hydro policy has failed

India’s Power Minister, PR Kumaramangalam, has admitted that the federal government’s policies for private participation in the country’s hydro power sector have failed to take off, primarily because of the problems associated with the sector.

In an interview with the Economic Times of New Delhi, Kumaramangalam said that the IPPs want to enter into joint ventures but they insist on tariffs being fixed on a cost-plus basis. This was not acceptable to the federal government, which said it would ‘lead to controversies’. The government wants projects to come through global bidding, but this has not been possible. Also, IPPs wishing to invest in hydro power projects insist on being given EPC contracts for the projects, while the federal government wants the contracts to be given on the basis of tenders.

In the light of its experience, the federal government feels that the public sector has to continue playing a significant role. It will set standards for other power projects and benchmarks for comparisons.