A Gujarat-based private export company Wednesday commissioned its first hydropower project in Himachal Pradesh built at a cost of Rs.56 million ($1.2 million).

The 1 MW project is located in Ching village in the scenic Rohru valley some 120 km from here.

"This is the first hydropower project in the private sector to be completed in Shimla district," said D.S. Mehta, joint managing director, Vishal Exports Overseas Limited (VEOL).

"VEOL's subsidiary Hateshwari Om Power Enterprises Pvt. Ltd has implemented the project," Mehta said.

"The project has been completed at a cost of Rs.56 million and has been funded by term loan from Indian Renewal Energy Development Authority (IREDA) and internal accruals. This project will generate 5 million units of electricity per year," he said.

VEOL has entered into a 10 year Power Purchase Agreement (PPA) with the state-run Himachal Pradesh State Electricity Board (HPSEB) for sale of power to be generated at a cost of Rs.2.50 per unit.

Company officials said VEOL also had plans to set up a 2 MW hydropower project with an investment of Rs.95 million in Himachal.

Himachal has a quarter of the country's entire hydropower potential. With less than a third of it being tapped, the government has encouraged private participation in recent years.

As part of its strategy to focus on the renewable energy sector, VEOL is also implementing wind farm projects in Tamil Nadu and Rajasthan. The company is planning a 82.5 MW wind farm project with an investment of Rs.4.5 billion in either of the two states.

Outlining the company's growth strategy in the renewable energy sector, Mehta said: "We see immense growth potential in the renewable energy generation sector and it will definitely benefit from the infrastructure push in India."

He said the company's revenue streams from renewable energy were expected to contribute substantially to the company's revenues in the coming years.

VEOL has already commissioned 19 wind turbine generators in Tamil Nadu and Rajasthan aggregating to 16.20 MW at a total project cost of Rs.690 million.

Vishal Exports Overseas Limited was established in 1988 as a partnership firm. Its core competence is in agro-based commodities, mainly soyabean extracts, wheat, rice and sugar.

It recently bagged an export deal for soya maize worth Rs.3 billion from a reputed commodity importer in Europe. The company exported 20,000 metric tonnes of groundnut to Britain last year.