New Delhi: A draft hydropower policy is being finalised in a bid to revive languishing sector in India, Power Minister RK Singh said on Wednesday.

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A sector which has failed to add even 2,500 MW of capacity in the last five years is in urgent need of revival given that only hydropower can help balance the grid in absorbing the much higher levels of renewable energy planned to be progressively introduced by the government, Singh said at a roundtable here with stakeholders organised by industry chamber Assocham.

"The 175 gigawatt (GW) capacity target from renewable sources is a given and is part of our international obligations (on climate change). To balance the grid, it needs balancing power and for that hydro fits the bill," he said.

He noted that hydroelectric power does not have to be imported, unlike gas, which could also perform the grid balancing function.

"We have a policy in the works for hydro power development which will be place shortly before the cabinet for approval. States are interested in its development and it is necessary for our future, " the Minister said referring to the environmental benefits of hydroelectricity.

"Renewables go with hydro for grid purposes also because the costs of solar and wind power have become quite cheap," he added.

Multipurpose projects, which were at the centre of India`s development strategy post-Independence, have become unviable because of revenue issues and the sector is saddled with a large share of stalled projects and stressed assets.

Singh said that the ministry had received various suggestions from stakeholders on a scheme of financial incentives.

"Some of these suggestions spoke of increase the period of loan and the depreciation period, which would help reduce the tariff," he said.

The country`s hydro power potential has been estimated at 140,000 MW, of which only around 45,000 MW of capacity has been developed, according to the Central Electricity Authority.