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Hydropower in India FAQ

June 30, 2011

Question: Why is the World Bank financing hydropower projects in India?

A key initiative of the Government of India is the development of hydropower to help meet the country’s energy needs and provide all its citizens with access to electricity by 2012.

Hydropower being an indigenously-available, clean and renewable source of energy, the Government of India is keen to use the largely untapped potential in this area – currently only 23 percent of India’s hydro potential is being utilized -- to provide the additional generating capacity it needs.

Moreover, additional hydropower capacity is desirable in India’s generation mix, as it provides the system operator with technically vital flexibility to meet the changes in demand which typically affect a power network like that of India. The high density of household demand in India means that the system can experience a peaking load of anything between 20,000 to 30,000 MegaWatts. This sudden spurt in demand can be best met by hydropower plants which have the ability to start up and shut down quickly. Other sources of power cannot do this as economically.

Also, the Government of India is committed to developing world-class companies that are able to design, construct, and maintain hydropower projects to international standards, and has requested the World Bank’s support in this endeavor. In addition to helping with financing, the Bank brings extensive experience in developing such projects across the world.

Question: Is the World Bank helping the country to plug the holes in the existing power system before embarking on expanding hydropower capacity?

The World Bank is assisting India in improving its overall power transmission, distribution, and management. For the last 10 years, the Bank has been working with several of India’s states to reform their power sectors in order to help their electricity utilities reduce losses and improve the efficiency of the system.

The Bank has also been working with Power Grid Corporation of India, which is a Central government enterprise operating the national power grid, in order to strengthen the transmission backbone of the country. We are also working on a project to improve the efficiency of existing coal-fired power plants.

The Indian power sector has made significant improvements in the maintenance and operation of its existing power systems. However, there is a limit to how much benefit in terms of additional power can be had from just these improvements. With the demand for electricity continuing to rise, the country needs also to look to additional and efficient generation.

Question: What lessons has the World Bank learnt from past experience in hydropower?

The Bank has been engaged in hydropower projects since the late 1950s. As important as they are, hydropower projects can be complex and challenging. Along the way, the Bank together with its partner governments and the international community has learned lessons about what works and what doesn’t work in such projects.

Experience has shown that a number of things are essential for such projects. These include:

• Careful selection of the site and appropriate engineering design;
• Solid initial investigations, especially regarding geological conditions;
• Strong and competent implementing agencies;
• Continued and substantive consultations with stakeholders;
• Early attention to social and environmental aspects of projects, in particular, mitigating the negative social and environmental impacts of the projects; and
• Appropriate financing and tariff design which are critical to the financial sustainability of projects with long gestation periods.

These lessons have now been incorporated into the Bank’s operational policies and implementation practices in the sector.

Question: How does the World Bank safeguard the interests of people affected by hydropower projects?

The World Bank's environmental and social safeguard policies prevent and mitigate undue harm to people and their environment in the development process. The effectiveness and development impact of Bank projects and programs has increased substantially as a result of these policies. Safeguard policies have often provided a platform for the participation of stakeholders in project design, and have been an important instrument for building ownership among local populations.

For more details, please go to: Safeguard Policies

Question: Is the World Bank financing renewable sources of energy?

Yes; and the World Bank’s assistance for hydropower development is only a part of its strategy to support renewable energy generation in India. It is also working with the Government of India to facilitate the use of other sources of renewable energy.

Question: Is the World Bank following the recommendations of the World Commission on Dams (WCD)?

The World Bank supports the core values and strategic priorities spelt out in the WCD report. The Bank also recognizes the WCD Report as a major contribution to defining issues around dam development and identifying innovative ideas for improved evaluation and management.

As regards the 26 guidelines enumerated in the Report, the Chair of the WCD has explained that these guidelines “offer guidance – not a regulatory framework. They are not laws to be obeyed rigidly,” adding that individual governments or private developers may wish to test the application of some of these guidelines in the context of specific projects. Consequently, the World Bank works with countries and companies on the hydropower projects it supports to see how the relevant guidelines, along with the Bank's safeguards, can be applied to individual projects in a practical, efficient and timely manner.

It may be added that the Government of India – like other governments that are building dams – has not accepted the guidelines of the WCD as prescriptive regulations. The WCD guidelines are among a growing set of best practices on sustainable hydropower development available today. These sets, which include the International Energy Association's guidelines and the International Hydropower Association's Assessment Protocol, all provide helpful advice and detailed checklists for project preparation.

More on the World Bank’s response to the World Commission of Dams

Question: Does the World Bank agree with the WCD recommendation that a dam be built only after local people have given their consent?

In the projects it supports, the World Bank requires that free and meaningful consultations with directly affected and indigenous people be undertaken at the very outset. As an integral part of several Bank safeguard policies, the views of these people must be carefully documented and the results of consultations be taken into account in deciding whether to proceed with the project or not.

However, the right of a sovereign state to decide how to use its natural resources in the best interests of the nation as a whole cannot be infringed.