For the purpose of tariff determination, depreciation shall be computed in the following manner, namely:-
(a) the value base for the purpose of depreciation shall be the normative capital cost (for generic tariff) or the capital cost of the project as admitted by the Commission (for project specific tariff), as the case may be;
(b) the salvage value of the asset shall be considered as 10% and depreciation shall be allowed up to maximum of 90% of the capital cost of the asset;
(c) depreciation per annum shall be based on ‘Differential Depreciation Approach’. For tariff purposes, the depreciation shall be allowed @ 5.83 % per annum till such time the requirement for repayment of loan component of the capital cost as per regulations 20, 22 and 23 after adjusting the amount of subsidy as per regulation 21, is fully provided and the remaining depreciation shall be spread over the residual useful life of the project on straight line method;
(d) depreciation shall be chargeable from the first year of commencement of operation of the project:
Provided that in case of operation of the asset for part of the year, depreciation shall be charged on pro rata basis for the purposes of project specific determination of tariff.
1 Add. proviso vide Not. No. HPERC-428 –Vol –VIII dated 11 th Feb., 2015, published in R H.P. dated
19.02.2015 at p. 6291-6293.
26 Compendium of HPERC Regulations, March 2021