Tariff determination and impact of tariff regulation on hydropower generator
Student name: Mr Dushyant Kumar
Guide: Dr Kaushik Ranjan Bandyopadhyay
Year of completion: 2012
Host Organisation: NHPC Ltd.
Supervisor (Host Organisation): Sh. V. K. Singh and Sh. Md. Faruque
Abstract: This report is intended for the hydropower generators under regulatory control of CERC.
The project has been carried out at Commercial Division of NHPC (A Govt. of India
Enterprise) by considering a construction project in J&K, Uri-II Hydro Electric Project
(60MWx4). Bulk power tariff has been calculated for multiyear tariff period 2009-2014 as
per prevailing regulations. Cash flow analysis using other tools has been used to measure
various performance indicators to ascertain whether the existing regulation for hydropower
meets the expectations of its shareholders. Apart from this, a hypothetical model has been
selected to ascertain effect of various factors on the financial performance of a hydroelectric
project.
Secondary data from NHPC and NSE website has been collected and processed for
measuring various performance indicators. The study reveals that tariff of hydroelectric
project is cheaper than other conventional source of power and the same decreases rapidly
down the time. Analysis also indicates that same regulatory treatment in terms of return on
investment/equity for hydropower and thermal power is inadequate. Under existing
regulatory ceiling on return on investment, it is difficult to meet the expectations of
shareholders as well as to add hydropower capacity. An upward revision of return on
investment is suggested keeping in view the market conditions and proportionate growth of
hydropower in India.
It also guides the fund managers in order to optimize various financial performance
indicators of the project through bargain of funds in terms of repayment period, interest rate,
debt equity ratio, etc. Further, it will provide basis for taking account of combinations of
various debts and their utilization at different point of time.
