The pact will be signed on Tuesday after Indian Prime Minister Narendra Modi arrives in Kathmandu for the Saarc Summit, according to Chief Secretary Lilamani Poudel.
A Cabinet meeting on Friday approved the credit line, paving the way for the agreement. During Modi’s last Nepal visit in August, he had announced the biggest ever Indian credit to Nepal.
The government has almost finalised the projects in which the soft loan will be used. The projects include Budhigandaki Hydroelectric Project, Mahakali III Irrigation Project, Koshi Pump Canal, and a multilane motorable bridge over the Mahakali River in Mahendranagar, according to the Finance Ministry.
“We are also holding talks on incorporating the Nalsinggadh hydropower project and a few road projects, including a section of the Mid-Hill Highway,” said a senior ministry official.
“We are also considering incorporating a few major projects from each development region.”
Since it is a framework agreement, it is not necessary to identify all the projects right now, the ministry official said. Finance Secretary Suman Prasad Sharma said the government plans to invest half of the credit in hydropower, 30 percent in roads and 20 percent in irrigation projects. “If half of the credit goes to Budhigandaki, Nalsinggadh may not receive funding,” said the ministry official.
In the case of Budhigandaki, France’s Tractebel Engineering recently submitted a draft of a study, which, according to a project official, has suggested increasing the project’s capacity to around 1,000MW from the current 600MW. The project is located in Gorkha and Dhading districts. “After the final report is out, its detailed engineering design will be prepared,” said Keshab Dhoj Adhikari, a board member of the Budhigandaki Hydroelectric Project Development Committee.
The proposed irrigation projects are also in need of resources. According to the Irrigation Ministry, Mahakali III needs Rs 16.5 billion for completion. As far as the Koshi Pump Cannel project is concerned, this old structure needs renovation.
The Saptari-based project, originally meant to irrigate 12,000 hectares of land, supplies water to only around 5,000 hectares currently. Around Rs 3.3 billion is needed to make it operate in full capacity.
For the motorable bridge over Mahakali, the Indian government had assured to assist the construction. The bridge will facilitate smooth traffic along the East-West Highway and establish a vital trade and transit linkage between Nepal’s Far-western Region and Indian cities of Uttar Pradesh, Delhi and Uttarakhand.
The loan, to be released through Exim Bank of India, will have just 1 percent interest rate, while the commitment charge has been reduced to 0.25 percent from 0.5 percent in previous credits. India will not charge any service fee. Earlier, it charged 0.25 percent.
The southern neighbour has also been liberal in setting other conditions, according to the ministry.
As per previous conditions, Indian contractors should mandatorily have had involvement in the projects, but this time, joint-ventures with Nepali contractors have also been approved.
Source : eKantipur