Hydro laws need to be harmonized, says energy ministry official

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    KATHMANDU, Aug 27 :

    DSI_5972A high-ranking government official has said that Nepal´s laws and provisions pertaining to the hydropower sector are riddled with contradictions and are insufficient.

    Joint secretary at the Ministry of Energy, Keshab Dhoj Adhikari made the observation presenting a paper titled ´Current Project Development Agreement and legal issues´ at the Power Summit 2013, which concluded in the capital on Tuesday.

    Adhikari, who heads the policy division at the finance ministry, said that a number of issues such as bonus distribution, royalty, land acquisition, among others, need harmonization as the laws are contradictory regarding the hydro power development in the country.

    For example, the Electricity Act stipulates bonus distribution of 2 percent whereas the Bonus Act ensures bonus distribution of 10 percent.
    “It causes difficulties while dealing with the hydropower developers for Project Development Agreement,” he said, adding “Our negotiations will lead us nowhere if we can not remove all such anomalies,”
    “Likewise, the legal framework for a power developer to issue shares to the people who need to be resettled, the amount the projects need to allocate as the corporate social responsibility are the other new issues that need to be incorporated in the law,” added Adhikari.

    On the second and the concluding day of the summit organized by the Independent Power Developers, presenters had shed light on the governments´ policies and legal provisions and the bureaucratic hassles and the lack of inter-ministerial coordination regarding the hydropower development.

    Presenting a paper on ´a bankable project development agreement,´ Senior Advocate Bharat Raj Uprety expressed dissatisfaction over the provision to keep PDA templates secret. “There is no basic free climate for the investment in the hydropower sector. Even the courts are not tuned with the gravity of issues pertaining to the hydropower sector,” added Uprety.

    He said the Supreme Court had issued a stay order on a minor petition on the Upper Karnali Project-delaying the project by three months, which had resulted in a huge loss.
    Likewise, the change in policies with the change of guard at MoE has badly affected the energy sector. Other challenges include the lack of checklists for various issues, and the tradition among the senior government officers to base their decisions on indiscretion, said Anil Kumar Sinha, a senior advocate.

    Banks and promoters playing blame game: Governor

    Governor of the Nepal Rastra Bank Yubaraj Khatiwada said that the banks and the promoters of hydropower projects are playing blame game with each other.
    Addressing the Power Summit, Khatiwada said, “The banks say that the promoters tend to inflate the equity amount of the projects while the promoters blame the banks of under evaluating the asset while financing their projects.”
    Shedding light on the risk aversion issue in the hydro sector investment, he advised both the sides to try to build confidence rather than hold each other responsible for the problem.

    The central bank governor also opined that the project developers should include the risk of exchange rates in the project analysis and financial appraisal instead of seeking risk guarantee from the government on foreign investment.

    Governor of the Nepal Rastra Bank Yubaraj Khatiwada has ruled out any possibility of abandoning the peg with the Indian currency, saying that it will not be timely or beneficial for the economy.

    “The current depreciation (of the Nepali currency) is a kind of wave and, I think, it will not last forever,” added Khatiwada.
    He further said, “The problem is not the same kind of the problem the Indian economy faced during early 1990s, therefore, hopefully the falling Indian rupee will stabilize soon and it will also help our currency to stabilize, too.”

    Stating that everybody were concerned about the status of the Indian economy, he added: “However I can not answer that multi- billion dollar question; even the newly appointed IRB governor and renowned economists can not explain the mystery.”

    Source : Republica

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    Power Summit concludes advising amendment of acts

    KATHMANDU, Aug 27

    Promoters and legal experts have concluded that around one and half dozen acts related to hydroelectricity should be amended to attract foreign investment in Nepal.

    They have recommended for a one-door policy on hydropower sector with coordination among the acts as the promoters have to make rounds of over 10 different bodies and adhere to over a dozen acts for a single project due to these acts. “Sixteen acts related to investment in hydropower sector needs to be reformed. Or else investment will not arrive,” senior advocate Anil Kumar Sinha said on the second day of the Power Summit. He drew the attention of the government for review of Electricity Act, Environment Conservation Act/Regulations, Industrial Enterprise Act, Investment Board (IB) Act/Regulations, Forests Act/Regulations, National Parks Regulations, Foreign Exchange Act/Regulations, Foreign Investment and Technology Transfer Act, Water Resources Act/Regulations, Land Acquisition Act/Regulations, Local Self-governance Act/Regulations, Company Act, Contract Act and Labor Act/Regulations. He also suggested that the issues like integrated license, Power Development Agreement (PDA), one-door policy, land acquisition and its ceiling, determination of the standard of resettlement, local participation in share investment and tax discounts should be addressed.

    Another senior advocate Bharat Raj Uprety stated that the promoters have faced problems in lack of coordination among the ministries concerned. He opined that there should be clarity on issues like sharing of risks involved in doing Power Purchase Agreement (PPA) in the US dollars, and taking back the dividends while investing in dollars. Stating that PDA has been stalled due to lack of coordination among acts, Joint Secretary at the Energy Ministry Keshav Dhwaj Adhikari said that the government is trying to amend them. He revealed that a draft is being prepared including the points to be amended as the acts can only be amended through an ordinance or the parliament. The government has formed a task force under the Joint Secretary of Law at the Energy Ministry Udaya Raj Sapkota to identify the contradictory acts and recommend for their amendment. The task force also includes representatives from the law, finance and energy ministries, and IB.

    Adhikari said that Bonus Act and Electricity Act are contradictory on the issue of bonus, and Local Self-governance Act and Electricity Act on the issue of electricity royalty. Similarly, acts about registration fees, royalty, income tax, value-added tax (VAT) are also conflicting. “There will be problems in initiating the process of signing PDA with promoters due to the conflicting acts. We are, therefore, preparing to amend the acts,” he added. IB has already started dialogue for PDA with GMR Energy of India for Upper Karnali (900 MW) and Marsyangdi II (600 MW), with Sutlej also of India for Arun III (900 MW), and SN Power of Norway for Tamakoshi III (650 MW). The Energy Ministry has also formed a PDA Dialogue committee under Adhikari for dialogue with promoters of the projects smaller than 500 MW.

    The Bonus Act has provision of providing a bonus of up to 10 percent of the company’s net profit while the Electricity Act requires the hydropower companies to provide two percent bonus. IB that has initiated dialogue for PDA of mega projects and the ministry preparing for PDA of smaller ones are confused by the contradictory provisions about determination of bonus. There are also contradictions among Electricity Regulations and other laws on the issue of registration fees. Similarly, the Electricity Act also contradicts with the Local Self-governance Act on the issue of royalty. IB and the ministry are also facing problems to levy a uniform income tax on the projects due to separate rates. Promoters are demanding repeal of export tax stating that it makes export-oriented projects financially unviable. The government has currently implemented 0.05 percent of export tax.

    Source : Karobar