CPM-UML stops PDA

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    KATHMANDU, Aug 5

    PDA_UMLThe power development agreement (PDA) with GMR Energy Limited of India for Upper Karnali Project could not be signed during the visit of Indian Prime Minister (PM) Narendra Modi due to disagreement of major coalition partner CPN-UML, according to the party’s vice chairman Bhim Rawal.

    It was stopped after the party insisted that it should only be signed after serious study about tax waiver and grant proposed for the export-oriented project and the impact of Upper Karnali downstream. The Investment Board (IB) and GMR, that had won competitive bidding in 2008 after promising free electricity and equity, had already reached agreement on PDA on Friday. An Italian Thai company will also invest in the project.

    Stating that adequate preparation has not been done for PTA and PDA, the cabinet meeting on Saturday decided to sign the agreement by forging consensus within 45 days. The government plans to attract investment in the hydropower sector doing the breakthrough PDA with GMR. The 900 MW project is set to be developed through GMR Upper Karnali Hydropower Limited. GMR has agreed to provide 108 MW (440 million units a year) of free electricity to the Nepal from the day the project comes into operation and free equity of 27 percent for the run of the river project. GMR will receive a grant of Rs 4.50 billion after completion of the project and complete tax waiver for the first 10 years and 50 percent discount for the next five years.

    The party has demanded additional discussions on grant of Rs 4.50 billion and tax waiver for a financially lucrative project like Upper Karnali and the issue of royalty. The ruling Nepali Congress (NC) and the major opposition party UCPN (Maoist) also stated that decision should be taken only after further study after CPN-UML also raised the issue of impact the project will have on the 11000 MW Karnali Chisapani Reservoir Project and under-construction Ranijamara-Kulariya Irrigation Project. The cabinet has formed a high level committee under Vice Chairman of the National Planning Commission (NPC) Prof. Govinda Raj Pokharel and including chief secretary, secretaries of all the ministries and governor of the Nepal Rastra Bank (NRB) to study the agreement between IB and GMR, and provide recommendations.

    “We asked to not take decision immediately as we felt it should be taken only after further study on the agreement between IB and GMR. We feel that decision on Upper Karnali should be taken only after detailed study,” CPN-UML Vice Chairman Rawal told Karobar. He stated there should be review on the subject of grant of Rs 4.50 billion and tax waiver for 15 years for a financially lucrative project like Upper Karnali. He also considered the suggestions of experts about the potential impact the project will have on other big projects like Karnali Chisapani Reservoir Project and Ranijamara-Kulariya Irrigation Project after its capacity was raised to 900 MW from 300 MW. “There have been talks about blocking the river for up to 18 hours a day during the dry season to collect water for Upper Karnali Project. There must be study about construction of the requisite infrastructure for minimization of the impact release of water thus accumulated at once will have, whether a regulating dam should be constructed to control release of water or not. Who should construct it if needs to be built? Such issues should be addressed,” he elaborated.

    The government has announced tax waiver and lump sum grant for promoters starting generation and exporting electricity by 2023 to attract investment in hydropower sector. All the projects starting generation by 2023 will get full tax waiver for the first 10 years and 50 percent discount for the next five years. The promoters will also receive lump sum grant of Rs 5 million per MW after connecting the generated electricity to the national grid.

    President of the Independent Power Producers’ Association, Nepal (IPPAN) Khadga Bahadur Bista, meanwhile, commented that CPN-UML has showed foolishness by obstructing PDA. He opined that it is wrong to stop the agreed PDA by raising the issue of downstream impact and tax waiver. “They should have made everything clear while handing over the project following competitive bidding. It is foolish to make a pretense at the time of agreement,” he stated.

    I am disappointed: Pant

    Chief Executive Officer (CEO) of IB Radhesh Pant expressed disappointment over stalling of PDA even after agreement with promoter GMR. “We worked round the clock for five days with GMR officials to sign PDA. But it could not be signed as the political parties did not understand. I am disappointed,” he said and expressed doubts that it will be signed within 45 years.

    He argued that the project is also Nepal’s due to 27 percent equity. He revealed that agreement has been reached with GMR to form a technical committee to do detailed study about the possible impact. He said initiative to minimize possible impact will only be taken after the committee completes study. “The decision about whether to construct regulating dam or not will be taken only after study,” he stated. Claiming that the project will not have adverse impact as reported in the media he added, “There is no truth to the claim that GMR will block Karnali river for 18 hours a day.” He insisted that this project will not have impact downstream as Karnali Chisapani is 140 kilometer upstream.

    IB had prepared to sign PDA with Arun III (900 MW) and Upper Marsyangdi II (600 MW) after signing that for Upper Karnali. Sutlej Hydro Power Corporation Limited is developing Arun III and GMR is constructing Upper Marsyangdi II through Himtal Hydropower. The International Financial Corporation (IFC) under the World Bank will also invest in Upper Marsyangdi II.

    Source : Karobar Daily