GERC Proposes New Tariff Framework For Small Hydro Power Projects In Gujarat Until 2031

The Gujarat Electricity Regulatory Commission (GERC) has released a detailed discussion paper for determining tariffs related to power procurement from small, mini, and micro hydro power projects in Gujarat. Issued in May 2026, the move is aimed at strengthening the state’s renewable energy framework while supporting India’s broader clean energy transition goals. The commission’s proposal is expected to provide greater clarity and long-term certainty for developers, investors, and power distribution companies involved in the hydro power sector.

Previously, tariff regulations for small hydro projects in Gujarat were governed by an order issued in 2016, which remained valid until March 2019. After the expiry of that framework, no fresh tariff order was introduced immediately. However, following the implementation of the Green Energy Open Access Rules by the central government in 2022, GERC decided to extend the applicability of the earlier tariff structure to avoid a regulatory gap. The commission has now proposed a new tariff control period extending from June 2022 to March 2031, ensuring policy continuity and investment stability for nearly a decade.

Gujarat holds considerable potential for small hydro power development, particularly due to its extensive canal-based infrastructure. Unlike hilly states that depend mainly on river-based hydro systems, Gujarat’s hydro opportunities are largely linked to canals managed by the Sardar Sarovar Narmada Nigam Limited (SSNNL). According to the discussion paper, some existing canal-top and canal-based hydro projects in the state have recorded Capacity Utilization Factors (CUF) between 34% and 39%, indicating strong operational performance.

The proposed framework categorizes hydro projects according to their installed capacity. Projects up to 100 kilowatts are classified as micro hydro projects, projects between 100 kilowatts and 2 megawatts fall under the mini hydro category, while installations ranging from 2 megawatts to 25 megawatts are considered small hydro projects. GERC has proposed determining tariffs using a cost-plus, single-part levelized tariff model over a project life span of 40 years.

The tariff calculations include various financial parameters such as capital expenditure, return on equity, interest on loans, depreciation, and operation and maintenance expenses. The commission has proposed a normative return on equity of 15.5%. For operation and maintenance costs, GERC has suggested charges equivalent to 3.5% of the project cost for plants below 5 MW and 2.5% for projects above 5 MW, along with an annual escalation rate of 5.72%. Developers may also avail incentives such as accelerated depreciation benefits of up to 60% during the first year of operation.

The discussion paper also aligns with Gujarat’s Renewable Purchase Obligation (RPO) targets. The state plans to gradually increase its hydro-specific RPO from 0.38% in FY 2024-25 to 1.33% by FY 2029-30. To ensure transparency and timely implementation, GERC has proposed mandatory installation of automated metering systems with real-time data sharing capabilities. Developers would also be required to submit bank guarantees of ₹10 lakh per megawatt. The commission has invited comments and suggestions from stakeholders before finalizing the tariff regulations.