New Delh: A joint venture led by NHPC, the country’s largest hydel power producer, will develop the 1,500-Mw Tipaimukh hydropower project in the north-eastern state of Manipur.

The project requires Rs 8,138 crore of investment and was initially awarded to the state-owned North Eastern Electric Power Corporation Ltd (Neepco). Which said it couldn’t do it, forlack of funds. “We wanted budgetary support to develop this project but that was not available,” said a senior official from the PSU.

In a meeting convened last month, the Union power ministry asked NHPC Ltd, Satluj Jal Vidyut Nigam (SJVN) and the state government of Manipur to form a joint venture to develop the project. NHPC would hold a 69 per cent stake and SJVN another 26 per cent. The other 5 per cent share would be with the Manipur government.

With the Tipaimukh project out of its shelf, Neepco’s planned capacity addition target has come down to 3,000 Mw from 4,500 mw earlier being planned by the end of March 2017. It has a current installed generation capacity of 1,130 Mw.

NHPC is finalising the draft memorandum of understanding for the proposed Tipaimukh JV. “The work is already in process. The draft MoU would be submitted within a month to the government, as desired by the ministry,” said a senior official from the company.

But, he added, investment in the project would not be made from the proceeds of NHPC’s Initial Public Offer (IPO), slated to open on August 7. The company had announced its maiden public issue earlier this month, by selling 1.62 billion shares to raise over Rs 6,000 crore from the capital market, of which Rs 2,000 crore would be used to fund seven projects under its expansion plan.

SJVN, the other stakeholder, is also confident about raising equity for the restructured plant. “All of our investment in Tipaimukh would be done completely from internal resources. We have over Rs 1,200 crore cash surplus available with us,” said a senior official. SJVN is the next power sector PSU in line for getting listed through a public issue, likely to be announced by the end of the current financial year.

“The levelized tariff is around Rs 4 per unit but it might go up by 40-50 paise due to the complex nature of the project,” he said. Of the free power available from the project, 11 per cent would go to Manipur, while 1 per cent would be shared with Mizoram, since parts of the project will be in Mizoram.

The SJVN official also informed that the cost of the 1,500 Mw project would be higher by at least Rs 1,000 crore owing to additional investment required for security and transport infrastructure to be developed alongside. The additional funding would directly come from the Centre as grant.

The Union home ministry has approved Rs 300 crore spending on project security, while Rs 203 crore have been approved for construction of a highway. The remaining money would go into flood control infrastructure.