Grant of Rs 5 m per MW for Upper Karnali advised

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    KATHMANDU, Aug 23

    Power development agreementsThe high level technical committee has recommended to provide a grant of Rs 5 million per MW for promoter of the Upper Karnali Project, GMR Energy Limited of India, in value-added tax (VAT) as per the prevailing laws.

    The committee has taken the decision despite Nepal Rastra Bank (NRB) Governor Yuba Raj Khatiwada and government secretaries against the idea of giving discount on income tax and grant to promoters of export-oriented projects. Coordinator of the committee and Vice Chairman of the National Planning Commission (NPC) Prof Govinda Raj Pokharel says the committee has recommended providing grant for the project as Nepal cannot discriminate between domestic and foreign investors as she has already become member of the World Trade Organization (WTO). GMR will now receive Rs 4.50 billion in grant after the project comes into operation.

    “The 13th meeting of the Investment Board (IB) had apparently already taken decision to provide tax discount and grant for promoter GMR. We should not stop the facilities as the IB including prime minister, ministers and NRB governor has already taken a decision to provide tax discount and grant to the export-oriented project,” he reasons. He says the government has decided to provide the grant for the VAT levied on construction materials. The government through the budget for the current fiscal year has announced grant of Rs 5 million per MW for hydropower projects to be completed by 2023 to address energy crisis in the country.

    The high level committee including chief secretary, NRB governor and secretaries of all the ministries is submitting the study report to Prime Minister and IB Chairman Suhil Koirala on Sunday. The committee has also recommended to construct Upper Karnali in a way not affecting irrigation. The report mentions that the independent technical committee to be formed by the government and GMR will decide whether to construct a regulating dam to control flow of water from the project’s reservoir. “There is a need for further study on the issue of regulating dam as it is a technical matter,” Pokharel reasons. He reveals that agreement has already been reached to study about the impact of the project within six months of signing the project development agreement (PDA) between the IB and GMR.

    He says the project will have to be completed within five years of financial closure and the generation license will be for a maximum of 25 years. GMR plans to generate electricity from the 900 MW project from 2021. The estimated cost of the project is around Rs 139 billion. GMR and the Nepal Electricity Authority (NEA) have already formed the Upper Karnali Hydropower Limited to construct the project. The NEA will receive 27 percent of free equity for the project. Pokharel reveals that the committee has advised that resettlement of those displaced by the project and environmental impact assessment should be done as per the guidelines of the World Bank (WB) and the Asian Development Bank (ADB).

    The committee has also suggested for provision of a separate dedicated power house to ensure that the transmission system of the NEA will directly receive the 108 MW of free energy from the project. The committee has advised so as Nepal should receive 108 MW of free energy even during the evening as per the agreement.

    PDA to be signed between the IB and GMR was obstructed following intense opposition about the possible impact on irrigation downstream and providing tax discount and grant for the project. The high level committee was formed by the cabinet to find out the problems seen in the project and make recommendations. The government has already made a decision to complete PDA within one and half months that expires after three weeks. There were preparations to sign PDA during the Nepal visit of Indian Prime Minister Narendra Modi but it did not materialize.

    The Agriculture and Energy Committee of the parliament has directed the government to sign PDA within the stipulated time by deciding about whether to provide tax discount and grant to Upper Karnali. The committee has instructed to sign PDA in a way that ensures safety of locals, their resettlement and allocation of shares for them. The government and GMR had signed the memorandum of understanding for the project in 2008.

    Meanwhile, construction of the regulating dam to control flow of water in Upper Karnali Project cannot be done, according to experts, as license for 330 MW Karnali-7 Project has been awarded 4.5-kilometer downstream to Lanco Infratech Limited of India.

    Source : Karobar