Himachal Eyeing State Control Over SJVN and NHPC Hydropower Projects is fraught with Legal Tangles and it needs more than what meets the eye.
Shimla:
In a redefining policy initiative the Himachal Pradesh government under Chief Minister Sukhvinder Singh Sukhu has decided to take back around 1,000 MW of hydroelectric projects previously allotted to central PSUs — NHPC and SJVN — reopening a complex chapter of revenue imperatives, legal entanglements, and economic calculations.
These projects- Luhri Stage-I is in Satluj, Dhaulasidh is in Beas and Dugar in Chenab are under execution.
On the other hand, the projects alloted to private players under earlier regimes were primarily in the Chenab basin in snowbound Lahaul-Spiti region.
The private players were giants like Tata Power, Moserbaer, Reliance Power, and DCM Shriram during.
Under the hydro policy framed during the tenure of late Chief Minister Virbhadra Singh, private developers were obligated to supply free power to the state government in a progressive slab system: 12% for the first 12 years, 18% for the next 18 years, and 30% thereafter until the project was handed over to the state after 40 years in functional condition.
However, private developers soon raised red flags about economic viability, citing the unique challenges of constructing in Lahaul-Spiti’s harsh terrain.
With the region cut off for nearly five months a year and severe winters curtailing construction to just seven months annually, developers argued that project costs could escalate by 50–60%.
Acknowledging these concerns, the then Virbhadra Singh government agreed to defer the recovery of free power dues in the initial 10 years post-commissioning, providing breathing space for loan repayments.
Despite these concessions, most private projects stumbled into legal disputes, eventually leading the government to cancel the allotments on various grounds.
The developers, however, took the matter to courts and arbitration, where disputes remain unresolved to this day.
In the subsequent Jai Ram Thakur regime, a shift in strategy saw several of these disputed projects handed over to central PSUs — NHPC and SJVN — with major policy relaxations to sweeten the deal.
Notably, the PSUs were allowed to pay a flat 12% free power across the project life cycle, ditching the earlier stepped slabs, and the requirement of handing over the projects to the state after 40 years was scrapped.
If NHPC and SJVN had commissioned these projects under such relaxed terms, Himachal Pradesh stood to lose roughly ₹200 crore in annual revenue at current power rates of ₹4.50 per unit — a cumulative shortfall of nearly ₹8,000 crore over 40 years.
Given these numbers, the current government’s decision reclaiming the these projects is financially prudent for the state.
However, the road ahead is laden with uncertainties.
NHPC and SJVN are expected to legally contest the cancellation of their allotments, potentially stalling any fresh bids.
Even private developers, as history shows, have not hesitated to seek legal remedies.
The subjudice status of many of these projects casts a shadow over future allotments.
Fresh agreements with new developers, if pursued, will need to account for pending court decisions.
Telangana’s example, where two such cancelled projects — Seli (400 MW) and Miyar (120 MW) — were picked up, offers some precedent, though the terms remain unclear.
Skepticism also clouds private sector interest in these projects
The old conditions, especially high free power slabs, could deter serious bidders. The viability becomes questionable, especially with the burden of free power commitments.
Against this backdrop, the state government could have exercised its best option by reserving these projects for execution within the state sector in the past.
By doing so, Himachal could have reduced the free power burden and cut generation costs by up to ₹1 per unit, making projects more viable.
But the change in regimes also changed the priorities of the government.
Professionalizing the Himachal Pradesh Power Corporation Ltd. (HPPCL) to the standards of NHPC and SJVN could have been the crucial next step — albeit an ambitious one.
As the Sukhu government doubles down on asserting energy sovereignty, Himachal’s hydro dreams hinge on its ability to navigate legal storms, restore investor confidence, and build its own capacity to harness its water wealth.
Both NHPC and SJVN could challenge the cancellation of their allotments in court, following the precedent set by private developers who have contested similar decisions through arbitration and legal channels.
Even the Dugar project, which was allotted to NHPC, remains sub judice, underscoring the legal complexities awaiting the state.
The government has deployed an evaluator to study the projects to SJVN and NHPC.
Much will depend on its findings and what next step the the state government takes.
Further, Himachal Pradesh holds equity stakes only in SJVN projects, not NHPC.
Thus, while the state will continue to receive its share of power from these equity stakes, revenue potential is directly tied to its ability to retain control over future project development.
A crucial question remains: will there be fresh takers for these projects under the old conditions that the Sukhu government has reassert.
Experts are skeptical. The viability of these projects is in serious doubt, especially given the current structure of free power obligations that private players are expected to meet.
With high free power slabs and other cost factors, private sector enthusiasm is expected to be muted.
However, this path requires significant institutional strengthening and a complete overhaul of the state-run corporations which on the face of it are mired in corruption and corporate issues, lacking both expertise and professionalism that SJVN and NHPC have.
The state need to professionalize HPPCL (Himachal Pradesh Power Corporation Limited) on the lines of NHPC and SJVN.
It is a "tall task" but a necessary step for long-term self-reliance in power generation and enhanced revenue realization.
As the stare government embarks on this ambitious restructuring of Himachal’s hydropower landscape, the vision is clear: to build energy sovereignty, bolster state revenues, and create a robust public-sector-led growth model.
But the road ahead will demand patient planning, legal resilience, and institutional grit.
Track record of HPPCL and HPSEBL inspires little confidence at this stage. Organizations, dealing with power sector, headed by bureaucrats, not by technocrats, is a major concern.
Can the state government inject extra power in its enterprises? Wishing and making good money is one thing, but delivering and execution is entirely a new game.
Government must weigh its pros and cons before taking a final call.
