Kathmandu — The Ministry of Finance has agreed to the modality proposed by the Ministry of Energy to move forward with the Budhigandaki reservoir-based hydropower project with a capacity of 1,200 megawatts.
According to the consent given by the Ministry of Finance, the amount collected so far through the infrastructure tax will be spent solely on the Budhigandaki project. In addition, it has been confirmed that an investment of around NPR 420 billion will be made by combining funds collected through the infrastructure tax over the next eight years, investment from the Nepal Electricity Authority, and by issuing shares to the general public. In line with this, a decision has been made to take the proposal to move the project forward to the Cabinet.
According to the government, about NPR 3 billion has already been spent so far on compensation in areas affected by the project. The remaining approximately NPR 8 billion will also be invested in this project.
Preparations are underway to implement the project by securing funds through an eight-year budget at an annual rate of approximately NPR 2.2 billion.
The basic cost of the Budhigandaki project, to be constructed in Dhading and Gorkha, was estimated at USD 277 million (around NPR 37.4 billion). Including the interest that will accrue over the eight-year construction period, the total estimated cost of the project is expected to reach NPR 406 billion.
The financial structure of the project has been prepared with 70% debt and 30% equity. In the promoter company, Budhigandaki Hydropower Company Limited, the Government of Nepal will hold 80% ownership, and the Nepal Electricity Authority will hold 20%. On behalf of the government, a total investment of NPR 248 billion will be made, including NPR 97.47 billion in equity and NPR 150 billion in concessional loans. The Authority will invest NPR 24.37 billion under the equity category.
In the proposal to be taken to the Cabinet, it has been proposed that, apart from the infrastructure tax, the Nepal Electricity Authority will contribute NPR 3.5 billion and NPR 9 billion will be raised by issuing shares to the general public.
It has also been arranged for the government to invest in the project the customs duties and value-added tax (VAT) incurred during construction. Furthermore, it has been proposed to allocate 50% of the infrastructure tax collected from petroleum imports to the Budhigandaki project.
Similarly, preparations are underway to issue “energy bonds” worth NPR 3 billion, which will be calculated based on liquidity ratios. Banks and financial institutions, insurance companies, and government funds will be able to invest in these bonds. Additionally, approximately NPR 104 billion in loans will be raised from banks and financial institutions.
The project is estimated to generate 141 million units of electricity during the dry season and 197 million units during the monsoon, totaling 338 million units annually. The proposed electricity purchase rate is NPR 12.40 per unit in the dry season and NPR 7.10 per unit in the monsoon.
The government says that about 90% of the land acquisition work has been completed. The project will affect 8,117 families in Gorkha and Dhading districts, of which 3,560 families will be completely displaced. After the construction of the 263-meter-high curved arch dam, a reservoir will spread over an area of approximately 63 square kilometers. Along with electricity generation, it is expected to provide multiple benefits, including tourism, employment, fish farming, and other uses in the lower river areas.
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