Sawalkote Hydropower Gets Rs 1,400 Crore Grant, Debt Pending

Estimated reading time: 6 minutes · Last updated: 10 November 2026

India's Public Investment Board has approved a Rs 1,400 crore grant for the 1800 Megawatt Sawalkote hydropower project on the Chenab in Jammu and Kashmir, but it did not rule on the bigger request. The Power Ministry wanted the Centre to lend Rs 18,730.25 crore as subordinate debt so the plant could sell power more cheaply. The Board told the ministry to take that loan to the budget division of the Department of Economic Affairs as a separate matter, as first reported by ETV Bharat. Subordinate debt is a loan that is repaid only after other creditors. Without it, the tariff stays well above what the ministry calls commercially viable. The Cabinet Committee on Economic Affairs must still approve construction.

unfortunately, the elected government has no control over the JKPDC or its decisions

Omar Abdullah, Chief Minister of Jammu and Kashmir

Why the Rs 18,730 Crore Loan Matters More Than the Grant

The grant is the smaller part of the Power Ministry's request. The Rs 1,400 crore goes towards infrastructure costs. The subordinate loan of Rs 18,730.25 crore decides what the plant's electricity will cost buyers.

Under the ministry's proposal, the Centre would charge no interest on the loan while the dam is being built. After that, interest would run at 1 per cent a year, and the full amount would be repaid within 25 years of the commercial operation date. The commercial operation date is the day the plant starts selling power.

The ministry says this cheap money would bring the energy tariff down from over Rs 9.57 per unit to just above Rs 5. It also proposed a 15.5 per cent return on equity for the developer, down from 17 per cent. The Board approved the grant. It did not reject the loan, but said the ministry should raise it with the budget division of the Department of Economic Affairs as a separate request.

How the Sawalkote Budget Fell From Rs 35,000 Crore

The proposal puts the project cost at Rs 26,373 crore, against an earlier estimate of Rs 35000 crore. That is roughly Rs 8,600 crore lower. The Board accepted funding at a debt-to-equity ratio of 75:25. Records show NHPC's 25 per cent equity share fixed at Rs 6243 crore.

Those pieces add up. The loan, the equity and the grant together come to about Rs 26,373 crore. Elsewhere, the ministry's loan proposal gives the total cost as Rs 26,376.66 crore. The two figures are close, but the gap between them has not been explained.

The Board also put the cost risk on the developer. If equity costs rise, NHPC pays the difference. The provisional completion date is August 2036. Before the proposal goes to the Cabinet Committee on Economic Affairs, the Board wants the draft note to compare Sawalkote's cost with NHPC's other hydroelectric projects.

What Jammu and Kashmir Wants Back From NHPC

In 2021, the administration led by the Lieutenant Governor gave the project to NHPC for 40 years on a build-own-operate-transfer basis. Under this model, NHPC builds and runs the plant, keeps the income, and then returns it to the region.

Rahul Yadav, managing director of the J&K State Power Development Corporation (JKSPDC), represented the Jammu and Kashmir government at the Board meeting. He supported the project. He also asked that the plant be returned after 40 years of operation with no outstanding liabilities attached.

Yadav raised a second point. The plant's design energy has been cut from 7994 MU to 7010 MU, a fall of roughly 12 per cent. That reduces the free power the region receives, and he asked for compensation. The Board's recommendation addressed neither request. Chief Minister Omar Abdullah, who also holds the power portfolio, said the corporation's board is headed by Lieutenant Governor Manoj Sinha. He said the elected government cannot direct its decisions.

Why a Four-Decade-Old Dam Is Moving Now

Sawalkote has been in the pipeline for about forty years. JKSPDC first developed it. The project then stalled over administrative problems, environmental concerns and Pakistan's objections to a dam on the Chenab.

The Chenab is one of three western rivers under the Indus Water Treaty, with the Jhelum and the Indus. On these rivers, the treaty allows India only limited use of the water for power generation. India suspended the treaty after the Pahalgam terror attack in April 2025. Since then, the government has pushed long-stalled hydropower projects in J&K, Sawalkote among them.

The site covers 1,401.35 hectares across three districts, including Ramban in Jammu. More than 840 hectares of that is forest. In September, NHPC opened bids for the first contract, a Rs 5129 crore Lot 1 package for civil and hydro-mechanical works. The bidders are Adani Group, Hindustan Construction Company Limited, Patel Engineering Limited, Larsen & Toubro Limited and Rithwik Projects Private Limited.

What could speed or stall Sawalkote

The bottom line

The Board's decision gives Sawalkote approval in principle without settling its cost. The Rs 1,400 crore grant and the 75:25 structure help, but they do not change the price of the plant's power. Only the Rs 18,730.25 crore loan does that. By routing the loan through the budget division, the Board has moved the hardest question to another office. It has also made NHPC carry any rise in equity cost through to August 2036. Jammu and Kashmir's requests on the handover and free power are still open. Omar Abdullah's comments show that local control over the project is disputed. Construction cannot begin until the Cabinet Committee on Economic Affairs approves it.

What to watch

• Watch for the Power Ministry's loan request to the budget division of the Department of Economic Affairs. No date has been set.
• Watch for a Cabinet Committee on Economic Affairs decision on construction, and whether its note compares costs across NHPC's hydro projects. No date has been announced.
• The August 2036 completion target is the date by which NHPC's cost discipline will be tested.