Shimla, Jan 6: The Himachal Pradesh Cabinet has approved a move to monetise the state’s share of free hydropower from major projects by selling it on the power market, a step aimed at strengthening the state’s finances and improving transparency in energy management.
Under the decision taken at the Cabinet meeting on December 30, the state will trade around 438 MW of free power received annually from the Nathpa Jhakri and Rampur hydropower projects in the Sutlej basin, instead of supplying it to the Himachal Pradesh State Electricity Board (HPSEB).
The Directorate of Energy has been designated as an Energy Management Centre and will handle power trading activities. Officials said the shift would allow the government to secure better financial returns compared to the earlier system.
“By selling free power through trading, the state expects to generate higher revenue while ensuring a more transparent and efficient mechanism,” a government official said.
Earlier, the free power was routed through HPSEB and distributed to consumers across Himachal Pradesh. The government now believes that market-linked trading will improve the state’s fiscal position.
In a separate decision, the Cabinet approved significant relief for hydropower projects with a capacity of up to 25 MW by rationalising the royalty charged as free power. Over 500 small hydel projects are expected to benefit.
As per the revised framework, all eligible projects — including those that have already signed Implementation Agreements — will now pay a uniform 12 per cent free power royalty along with a one per cent contribution to the Local Area Development Fund (LADF).
Earlier, developers were required to pay enhanced royalties ranging between 12 and 30 per cent, in addition to the LADF contribution, a structure that project developers said had rendered several projects financially unviable.
The changes follow recommendations of a Cabinet sub-committee headed by Revenue and Horticulture Minister Jagat Singh Negi.
The government expects the revised policy to unlock investments of nearly Rs 20,000 crore and revive stalled hydropower projects. However, the relief will not apply to projects that have already been commissioned or those with Power Purchase Agreements signed with HPSEB.
