The renewable energy tag will help hydro power get a priority over thermal electricity while being dispatched to the consumers. The hydro sector will also get additional leg-up as the states can fulfill their mandatory renewable purchase obligations by buying electricity from these power plants.

The ministry also seeks cabinet approval for introducing a separate ‘hydropower purchase obligation’ category. To reduce hydro-power tariffs, the ministry also wants the cabinet to approve, modify existing norms and not let the host states receive free power from hydro power plants till five years from commissioning.

The ministry has also asked for in-principle approval to allow infrastructure costs that are not directly related to power generation to be excluded from calculation of hydro electricity tariffs.

The ministry has proposed a four percent interest subvention scheme for 22 hydro projects with 10,436 MW capacity, likely to be commissioned in the next five years. It has also recommended that operation and maintenance cost should be estimated at one percent for tariff calculation. Currently, such costs are estimated at three percent while calculating tariffs, raising the cost of hydro power.