India’s Guidelines on Cross Border Trade of Electricity, Hurdles for Chinese Investors
Kathmandu – One and a half years have passed since Nepal wrote to India to buy electricity from the 456 MW Upper Tamakoshi Hydropower Project. In October 2018, Nepal proposed to sell electricity for 5 projects including Upper Tamakoshi Hydro. India agreed to purchase electricity from projects invested by Indian companies. But there is a speculation that India does not like to buy Tamakoshi’s electricity, which is completely built with Nepali capital, because there is no investment from Indian companies.
The government hopes that this project will also get permission. As a matter of fact, Nepal today does not correspond to export electricity from projects that do not have Indian or Nepali investment.
This may be the reason, mainly Chinese investors are starting to hesitate from Nepal. Some Chinese investors are not in touch while the pace of construction projects has slowed down. Experts consider this to be the effect of India monopolizing the hydropower market. After India adopted a policy of not buying electricity produced from countries with no power trade agreement in the ‘Guidelines on Cross Boarder Power Trade ‘ introduced in 2016 and amended in 2018, Chinese investment has gradually started to withdraw from project construction.
Since last year, Nepal has been selling 452 MW of electricity in the Indian market. India has not given permission for the sale of 18 projects including 456 MW Tamakosi sent by Nepal for permission. After India got stuck, the Nepal Electricity Authority has also sent the names of its own projects and some Nepalese projects.
Although no official information has been given on the stalling of the Tamakoshi project, there is speculation in Nepal that it is being kept as a Chinese investment. The civil work of this project was done by the Chinese company Sino Hydro. Prime Minister Pushpa Kamal Dahal, who is on a visit to India, asked to buy electricity from the Tamakoshi project in a press conference with Indian Prime Minister Narendra Modi. But India did not give a concrete answer. This has deterred the Chinese investors who are investing here and investors from other countries who are willing to invest. Chinese investment has also started to withdraw from the joint venture (JV) project of Nepali investors and Chinese investors.
After seeing the lack of market assurance, the Chinese side has begun to withdraw from Chinese projects. Nepali investors are also backing away from bringing Chinese investment. 1200 MW Budhigandaki project, 750 MW West Seti, 235 MW Humla Karnali-1, 335 MW Humla Karnali-2 project have been pulled out after they could not proceed.
After the exit of the Chinese company, the Humla Karnali 1 and 2 projects are currently taken over by Ruru Hydropower. Ashish Subedi, head of the company, said that Ruru Hydropower took the license after the Chinese company did not build the project. “We have taken the license of the Chinese company after showing problems including the market,” he said.
Chinese investment has also pulled out of the 164 MW Kaligandaki Gorge project. Gyanendra Lal Pradhana, the head of Hydro Solutions, says that the Chinese investment has withdrawn from the project that was supposed to be made in the JV of Nepali investor Hydro Solutions and Chinese investor Yunan Xinhua. “As the latest policy of India will lead to market shortage, if the Chinese investors withdraw, they are going to make the project completely with Nepali investment,” he said.
Pradhan said that after not buying the electricity of the Tamakoshi project, they are going to build the project together with Nepali investors. The Chinese company that has taken the license of 139.2 MW lower Manang Masyarngdi, 135 MW capacity Manang Marsyangdi and 102 MW upper Trishuli-2 project is in doubt whether to proceed with the project or not. Chiranjeevi Chataut, director general of the electricity development department, says that although many Chinese companies came to build hydropower projects until recently, they even stopped extending the last license. Construction of hydropower projects is very expensive. The builder will raise investment by selling electricity,” he said.
Chataut says that the department will not differentiate between the Indian and Chinese sides and will grant the license if the process is completed. It is said that the government has been giving and taking back the big projects that China has received. Earlier, the 1200 MW Budhigandaki project, which was supposed to be built by a Chinese company, was taken away from the Chinese company. Political parties are debating when to give this project to the Chinese company China Gezhouba Group Company and when to build it themselves. As a result, the project has not yet gone into construction. The West Seti project was also given and withdrawn to a Chinese company. After West Seti was acquired by the Chinese company Three Gorges in 2006, it was taken away from the company and handed over to an Indian company. Currently, this project is in the hands of the Indian company NHPC Limited.
Which projects are being delayed ?
The pace of 756 MW Tamor, 270 MW Bheri 1 and 256 MW Bheri-2, 102 MW Upper Trishuli-2, 756 MW Tamor and 120 MW Rasuwa Bhotekoshi project is very slow after seeing the investment stall.
The Tamor hydroelectric project, which is a large project, is also ready to be withdrawn from the Chinese company Power China, saying that it is not working as per the agreement. It was agreed that Power China will jointly build with Nepal Hydroelectricity Investment and Development Company (HIDCL). HIDCL had sent a letter to the Board of Investment to cancel the contract saying that Power China was not working as per the agreement. After that, the Board of Investment has asked to give an explanation within a month.
Butwal Power Company (BPC) and Chinese company Sichuan Investment Group are in the construction phase of three projects. BPC and Sichuan have prepared to build the 327 MW Upper Marsyangdi-2 Hydropower Project, 135 MW Manang-Marsyangdi Hydropower Project and Lower Manang-Marsyangdi Hydropower Project.
Prateek Pradhan, Vice President of Butwal Power Company informed that the Power Purchase Agreement (PPA) of 135 MW Manang-Marsyangdi has been signed. Sichuan Investment owns 80 percent of BPC’s three projects. Sichuan is responsible for the construction of Rasuwa Bhotekoshi Ayajana. According to the Electricity Development Department, the builder of the Upper Trishuli-2 project, which went into construction in 076, has not been contacted. The department says that it has not informed about the remaining progress of the project, which was started in 2016, to be completed in 56 months.
Similarly, the 270 MW Bheri-1 and 256 MW projects, which are supposed to be built by Gejuwa Group, are also in confusion. China’s Gejuwa Group took a survey license to build these projects. The department said that they have received permission for the study phase of these projects and have not received any updates thereafter.
Krishna Prasad Acharya, the outgoing president of the Independent Energy Producers Association of Nepal (IPPAN), says that Chinese investors may not have invested in the Nepali hydropower sector recently because they did not see investment as safe. Investors will invest only when they see an opportunity. At present, they may not have invested because they have not seen the return of the investment,” he said. “If the situation is easy, they will invest, if it is not, they will not do it.”
According to Mukesh Kafle, the former executive director of Nepal Electricity Authority, the Chinese investors gradually withdrew from the Nepali hydropower sector after seeing that the investment did not rise. The basic principle of investment is its security. After generating hydroelectric power, it is mandatory for the market to sell it,” he said.
He added, “Private investment is for commercial purposes, in a situation where there is no market and in a country where there is no market, who invests in it? Geopolitically, the steps taken by India should not be doubted. Energy expert Ram Prasad Dhital says that Chinese investors have started withdrawing from hydropower after not seeing the market. He said that the Chinese have left because the Nepalese electricity market has no other domestic consumption than India, and it should be sold in India and they will not take Chinese investment.
Water resource expert Suryanath Upadhyay insists that Nepal should raise the issue of changing India’s guidelines.
Source : Kantipur Daily