India's Union Cabinet has given investment approval for construction of the 1,000-MW Pakal Dul hydroelectric project and initial investment in two other hydro projects, all in India's Jammu & Kashmir State.
Chaired by Prime Minister Narendra Modi, the cabinet gave investment approval to build Pakal Dul on the Chenab River at an estimated cost of 81.1 billion rupees (US$1.3 billion). That includes interest during construction and financing charges of 5 billion rupees (US$82 million) at March 2013 price level with a debt-equity ratio of 70:30. The approval also includes subordinate debt of 25 billion rupees (US$411 million) on conditions and waivers of the government of Jammu & Kashmir in a scheduled completion period of 66 months.
The cabinet also approved infusion of equity up to 16 billion rupees (US$263 million) by government-owned hydro developer NHPC Ltd. in Chenab Valley Power Projects Pvt. Ltd. for construction of Pakal Dul and for initial investment in the 660-MW Kiru and 560-MW Kwar hydroelectric projects in Jammu & Kashmir.
The cabinet also gave ex-post facto approval for formation and incorporation of Chenab Valley Power, a joint venture of NHPC and Jammu & Kashmir State Development Corp., each owning 49 percent, and government-owned power trader PTC India Ltd., owning 2 percent.
The Jammu & Kashmir government has sanctioned exemption of Pakal Dul from work contract tax entry tax and waiver of free power and water user charges for 10 years from completion of the project. The state is to purchase 49 percent of project power, with the remaining power allocated to states in India's Northern Region, excluding Himachal Pradesh, which declined to purchase power.
The government said Pakal Dul would help reduce the power shortage in the northern region and partly utilize storage provisions of the Indus Water Treaty with Pakistan. Pakistan has expressed treaty concerns about India's development of Pakal Dul and three other projects.
NHPC previously attempted to pre-qualify builders for the plant's construction beginning in May 2006 through March 2007. Pakal Dul is to include a concrete-faced rockfill dam, headrace tunnel, underground powerhouse containing four 250-MW Francis turbine-generators, and a switchyard.