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New small hydro plans for India

The Indian Renewable Energy Development Agency (IREDA) has put together new funding to expand its small hydro project scheme, and is attracting great interest from firms — private and public — who see it as a fast, clean and legally simple route to more power.

The project aims to finance 200MW of small hydro development by private sector investors, and is funded as follows: •US$110M from various private investors.

•US$170M from the World Bank.

•US$15M from IREDA.

•US$5M from co-financing.

IREDA will lend to Indian borrowers at a rate of 16-17% over 10 years, with three years grace. These end-user rates are quite high, and are not fixed rates, although they are probably less than commercial loans in this sector. The high interest rates do, however, raise questions about local top slicing on low-cost loans from abroad.

Currently around 500MW of small hydro has been developed in India, with another 500MW under way. Some of this was funded by IREDA’s first World Bank credit, which was for US$70M, and which has underwritten 22 private hydro schemes totalling 125MW.

Nearly 600 small hydro schemes totalling 1580MW have been identified in nine states, and two-thirds of these are being made available for private sector development. (See article, p38).