Cabinet endorsement to follow
KATHMANDU, Aug 1: The board of Investment Board Nepal (IBN) is holding discussion on the draft of Project Development Agreement (PDA) for Upper Karnali Hydropower Project on Saturday.
Highly-placed government sources said the cabinet is expected to endorse PDA on Saturday itself. IBN is preparing to sign PDA with GMR — the Indian company which is developing the 900-MW project — in the presence of Indian Prime Minister Narendra Modi.
Modi is arriving Nepal on a two-day visit on Sunday.
Though political parties had given mixed response to the contents in PDA template, IBN has forwarded it to its board for approval.
A source at IBN told Republica that the draft of PDA will be forwarded to the cabinet once it is endorsed by the board. Another source at the Ministry of Energy claimed that all for PDA had been completed. He said that the cabinet will endorse it once it is approved by the IBN board.
The IBN board, which is chaired by the prime minister, has finance minister, industry minister, forest minister, chief secretary, governor of Nepal Rastra Bank (NRB) and vice chairman of National Planning Commission as members. IBN CEO Radesh Panta is the member secretary of the board. Similarly, the board has energy minister, physical infrastructure minister, tourism Minister, secretary at the Office of the Prime Minister and Council of Ministers, and two from the private sector are permanent invitees in the board.
Talking to Republica, Lilamani Pokhrel, chief of the energy department of UCPN (Maoist), said his party has reservation on issues like VAT exemption for the developer. “The project might hamper irrigation projects in Tarai. But the issue has not been looked into,” he added.
Some political parties, including UCPN (Maoist), have taken exception on some provisions in the PDA template like 100 percent VAT exemption. They argued that the provision is discriminatory as none of the domestic developers are enjoying the facility.
IBN had started PDA negations with GMR around one and half years ago. It was waiting for the government to introduce some provisions like income tax holiday and other incentives. PDA negotiations gained pace after the government addressed some of the concerns raised by the developers through the budget speech for fiscal year 2014/15.
The PDA document elaborates all details of liabilities of the developer and the government and addresses possible risks and protection from the change in policy, among others. This document is important to convince financing companies as it provides them a sort of assurance for project development.
The development comes two days before Indian Prime Minister Narendra Modi´s scheduled visit to Nepal.
It is expected that the singing of PDA with GMR for Upper Karnali will pave the way for other projects like Upper Trishuli I and Arun III.
Arun III is being developed by Indian government undertaking Sutlej Jal Vidyut Nigam.
Sources say the provision for resettlement of people in the affected areas will be in the standards of the World Bank and the Asian Development Bank.
Similarly, IBN has reportedly removed a clause that required government to seek GMR´s permission while awarding licenses to projects lying upstream or downstream of Upper Karnali.
GMR has offered Nepal 12 percent of the energy generated by the project for free and free equity of 27 percent in the project.
Source : Republica