Govt Blocks NHPC Bid to Use Forest Assets for Subansiri Funds

By Manisha Sahu | America News World
Published: December 10, 2025

The Union Environment Ministry has declined a request from the National Hydroelectric Power Corporation (NHPC) seeking permission to use its assets located on forest land as collateral for raising funds for the long-delayed Subansiri Lower Hydroelectric Project (SLHEP). The refusal comes at a time when the project, situated on the Arunachal Pradesh–Assam border, is grappling with a staggering cost escalation of more than 300 percent, highlighting deep-rooted structural, financial, and environmental challenges.

The Subansiri Lower hydel project is located along the Arunachal Pradesh–Assam border. (NHPC)

According to official documents reviewed by America News World, NHPC had approached the Ministry seeking a No-Objection Certificate (NOC) to mortgage assets built on forest land, hoping to leverage these installations to raise additional funding from financial institutions. The proposal aimed to address capital shortages and keep the project—one of India’s most ambitious hydropower undertakings—on track.

However, the Environment Ministry flagged the move, stating that forest land, once allocated for a public-purpose project, cannot be used for collateralization, as doing so would violate the Forest Conservation Act (FCA) and potentially set a problematic precedent for other infrastructure ventures operating on forested areas.

A Legal Red Line on Forest Assets

At the heart of the Ministry’s objection is the protection-oriented legal framework governing India’s forest lands. Assets created on forest areas—such as powerhouses, dams, tunnels, and associated hydropower infrastructure—are permitted strictly for the purposes defined in the original forest clearance. Any attempt to repurpose them, even indirectly through financial collateral, risks a breach of statutory conditions.

Government sources noted that allowing such assets to be pledged to lenders could create complicated ownership disputes if the borrower defaults. Private financial institutions, in such a scenario, might claim rights over land that legally belongs to the state and is governed by conservation laws.

Officials familiar with the review process emphasized that the Ministry must uphold the integrity of forest governance. “Forest land cannot become an instrument in commercial financial transactions,” a senior official stated. “Clearances are granted for project execution, not for monetization or collateralization.”

Arunachal Pradesh Government Seeks Clarification

Following NHPC’s proposal, the Arunachal Pradesh government reached out to the Environment Ministry seeking clarification on whether an NOC could be granted without contravening environmental laws. The project, though located partly in Arunachal Pradesh, has major socio-environmental implications for downstream Assam, making central oversight indispensably stringent.

The state government reportedly wanted to ascertain whether NHPC’s request had any precedent. The Ministry’s response, however, was categorical: no such collateral use of forest land–based assets has been permitted in the past, and doing so now would be inconsistent with statutory mandates.

A Project Mired in Delays and Escalating Costs

The Subansiri Lower hydel project, envisioned as a 2,000 MW hydroelectric facility on the Subansiri River, has been under construction for over two decades. Initially estimated at Rs 6,285 crore in 2003, the project cost has soared to more than Rs 22,000 crore, marking an escalation of over 300 percent.

Multiple factors have contributed to this rise:

1. Prolonged Construction Delays

From its inception, the project has faced major delays due to environmental litigation, safety concerns raised by activists, and resistance from downstream communities in Assam worried about flood hazards.

2. Design Revisions and Technical Checks

Expert panels have mandated several design changes to enhance structural safety and address seismic concerns in the geologically sensitive Northeast region. Each revision added years of delay and significant additional expenditure.

3. Inflation and Market Fluctuations

Global increases in construction material costs, logistical constraints, and rising labor expenditures further inflated the budget.

4. Project Suspensions Due to Protests

Local mobilizations, led by organizations such as the All Assam Students’ Union (AASU), halted work on multiple occasions, adding to both direct and indirect costs.

Given these pressures, NHPC has been aggressively exploring avenues to raise funds to complete the project, leading to the proposal that the Environment Ministry has now rejected.

Why Subansiri Lower Project Matters

Despite persistent setbacks, the Subansiri Lower hydel project remains strategically significant for India’s northeastern power landscape. Once operational, it is expected to:

– Generate substantial clean electricity for the region

– Strengthen grid stability

– Reduce dependence on thermal power

– Serve as a benchmark for upcoming hydropower projects in the frontier states

The Northeast is considered India’s hydropower hub, with an estimated potential of over 58,000 MW. The success—or failure—of SLHEP could influence the future of large-scale hydroelectric investments in the region.

Environmental and Social Concerns Continue

Critics have long argued that mega hydropower projects in the ecologically fragile Himalayas pose significant risks. These include:

– Impacts on river ecosystems

– Loss of forest cover

– Displacement of local communities

– Downstream flood vulnerability

– Increased landslide risk in seismic zones

The Ministry’s refusal to allow collateralization of forest land assets reflects not only legal caution but also an implicit acknowledgement of these concerns. It sends a signal that environmental safeguards cannot be diluted even amidst financial urgency.

What Lies Ahead for NHPC and the Project

With the NOC denied, NHPC will now need to seek alternative financing mechanisms, likely relying on government allocations, market borrowings, or restructuring of existing loans. The setback could slow down construction timelines further unless the company secures quick financial assurances.

Industry experts suggest that the Centre may need to intervene to help stabilize funding for the project, given its national importance.

Meanwhile, environmental groups have welcomed the Ministry’s decision as a reaffirmation of regulatory vigilance. However, they continue to press for transparent environmental auditing before any fresh approvals or financial changes are considered.

As the Subansiri Lower project stands at a crossroads, the coming months will be critical in determining whether India can balance its energy ambitions with environmental responsibility—without allowing financial strain to override regulatory safeguards.