Chief secy, governor against paying cash incentive

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    • Upper Karnali Project Development Agreement

    Power development agreementsKATHMANDU, Aug 30: Chief-secretary Leela Mani Paudyal and Nepal Rastra Bank Governor Yubaraj Khatiwada have opposed the plan of paying cash incentives to the 900 megawatts Upper Karnali Hydropower project. 

    A 13-member technical committee formed to study the Project Development Agreement of Upper Karnali on Friday submitted its report to Prime Minister Sushil Koirala saying that they could not reach an agreement on paying cash incentives in lieu of VAT and other taxes to the project. 

    Paudyal and Khatiwada opposed the idea of paying incentive of Rs 5 million per MW to the export-oriented project saying it would set a negative precedent, sources said. If the government decides to pay cash incentive to the project, it would have to pay Rs 4.5 billion to the project after completion. 

    Vice-chairman of the National Planning Commission Govinda Raj Pokharel, also a team leader of the technical committee, confirmed that they submitted the report without the consent of two members on the issue of paying cash incentives“ “Therefore, we submitted the report with open-ended suggestion”,” added Pokharel. 

    The Investment Board Nepal had prepared PDA document with a provision of paying cash incentive as provisioned for developers of projects for domestic consumption in fiscal policy announced in the budget. Pokharel argued that investment in hydropower would not increase if there is lack of investment-friendly climate in the country. He also argued that the country can only balance trade deficit with India by exporting electricity. 

    The committee submitted the report on Friday, a week later than scheduled earlier, as committee members held different views on the issue. Likewise, a source also informed that the governor was against cash incentive proposal as the money to be paid to developers would come from the taxpayers´ money. 

    A high-level official of the Ministry of Finance said the provision of cash incentive in the fiscal policy is only for domestic developers. 

    An official at the Office of the Prime Minister and Council of Ministers wondered how the government could pay a cash incentive of Rs 4.5 billion to the developer while it has not even been able to invest Rs 1 billion for petroleum pipeline. 

    Detractors of the provision fear that paying cash incentive to export-oriented project would set a wrong precedent as there are several such projects in the pipeline, including Arun III (900 megawatts), Upper Marshyangdi -2 (650 megawatts) and Lower Arun (400 megawatts). 

    After receiving the PDA document from IBN officials in the first week of August, PM Koirala had formed a committee to study the document and make recommendations to the government. During the visit of Indian Prime Minister Narendra Modi, the two countries had agreed to sign Power Trade Agreement and PDA of Upper Karnali.

    Source : Republica