The government is mulling a policy for developing hydro-power capacity, under which projects, possibly of 2,000-3,000 Mw each, would be drawn up and offered to private and public sector developers.

The policy for ultra mega "hydro" projects is expected to mirror the one put in place last year for ultra mega "thermal" projects, two of which were recently bagged by private sector developers.

The 4,000 Mw each projects at Sasan in Madhya Pradesh and Mundra in Gujarat were bagged by Lanco Infratech [Get Quote] and Tata Power [Get Quote], respectively.

The two developers' bids - Rs 1.196 per unit by Lanco and Rs 2.26 per unit by Tata Power - are extremely competitive and are being seen as a new benchmark in thermal power generation.

"The ministry is in the process of finalising the project sites. So far, none has been finalised. The policy blueprint is likely to be drawn up in a month's time," sources told Business Standard. It is likely that the 3,000-Mw Lohit hydro-power project, located close to the Indo-China border in Arunachal Pradesh, would be made a part of the initiative.

Prime Minister Manmohan Singh, on a recent visit to Japan, had said the Lohit project would be implemented with Japanese assistance.

Sources said the power ministry was looking at adopting the special purpose vehicle route for the ultra mega hydro projects, as had been done for ultra mega thermal projects. Already, a Cabinet note has been put up by the power ministry to give parity to private developers vis-a-vis the public sector for generation of hydro-power.

According to the draft policy for development of hydro projects by the private sector, finalised by Union Power Secretary R V Shahi recently, the existing system of allocation of projects by states would be extended to the private sector.

This implies that state governments in the north-eastern and other Himalayan states may award projects to private companies with sound credentials.

Himachal Pradesh, Uttaranchal, Sikkim and Arunachal Pradesh have awarded 35 projects of 10,000 Mw capacity to the private sector till date.

Another 35 projects of 3,000 Mw capacity are in the process of being awarded by Himachal Pradesh. India has an estimated hydro-power potential of 1,50,000 Mw, of which only 33,600 Mw has been tapped.