License Only Through Free Competition

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    policyThe government will provide license for hydropower projects to the private sector only through free competition. The Energy Ministry, that had earlier been issuing license on first-come-first-serve basis, is preparing to make legal amendment to issue it only through free competition.

    The ministry is preparing to form a draft committee including former energy secretary and hydropower expert Surya Nath Upadhyaya and former law secretary Madhav Poudel. The ministry currently issues survey license for a maximum of five years after promoters identify a project. The ministry can also extend the license on the basis of progress.

    Energy Secretary Rajendar Kishore Chhteri says the government is preparing to bring the provision of free competition to make the license system more transparent and contemporary. He hopes that different models like free energy, free equity, cheap energy, more advance payment and others will be adopted for free competition. Provisions for addressing the risks related to contract and project development agreement (PDA) will also be included in the Electricity Act. “Everything related to hydropower will be addressed through the act. One will not get a license now by merely applying first and must compete to acquire one,” he adds. He reveals that the draft will be finalized soon after holding discussions with stakeholders.

    Addressing the Agriculture and Water Resource Committee of the parliament on Sunday, he drew the attention of lawmakers to make arrangements for passing the act through fast-track system. Chairman of the committee Gagan Thapa said comprehensive dialogue is necessary on the draft to be prepared. Secretary Chhetri clarified that the government was preparing to complete the draft by December but it was delayed due to different reasons. Stating that we should not act in haste in an important issue like that of the act, he added that only an act brought after adequate discussions will be effective. Energy Minister Radha Kumari Gyawali said that discussions on the draft have already been held with different stakeholders including former energy ministers, and expressed commitment to bring the act soon.

    The government currently has only handed Upper Karnali and Arun III (900 MW each), 37.6 MW Kaveli A and Super Six projects over to the private sector through free competition. Promoter of Upper Karnali, GMR Energy Limited of India, has promised 12 percent of free energy and free equity of 27 percent while that of Arun III, Sutlej Jalavidyut Nigam Limited of India, has committed to provide 21.9 percent of free energy. Similarly, the government issued license for Kaveli A to Butwal Power Company (BPC) after it proposed to sell electricity at a cheap rate. Likewise, promoters got license for the Super Six projects after they paid more in advance. The government has issued survey license for 85 big projects and generation license for 84 projects to the private sector until now.

    Meanwhile, the act will also include a provision prohibiting the government from developing a project with installed capacity of less than 100 MW. “Big projects have been affected when the government has been stuck in small projects. We are, therefore, including such provision in the act,” Chhetri explains. The Nepal Electricity Authority (NEA) currently has been constructing 30 MW Chameliya, 32 MW Rahughat, 14 MW Kulekhani III and 60 MW Trishuli 3A. The Department of Electricity Development is also preparing to develop 20 MW Budiganga Hydropower Project for trial.

    The private sector has been demanding amendment of the Electricity Act brought 22 years ago stating that it is incomplete and has failed to create investment-friendly environment. The act has provided prerogative powers to the ministry to issue license for projects.

    Source : Karobar Daily