KATHMANDU: Finance Minister Ram Sharan Mahat today said signing of Project Development Agreement (PDA) on 900MW Upper Karnali hydroelectric project would be a ‘game changer’ for the country’s energy sector.
His statement comes at a time when there have been delays in sealing deal due to ongoing debate over whether government should extend cash incentive of Rs five million for every megawatt of electricity generated by export-oriented hydro projects like Upper Karnali.
“There are those who are creating hurdles in the development process of the country. I urge everyone not to politicise issues related to water resources, as we have already suffered ample losses in the past,” Mahat told an interaction organised by the Federation of Nepalese Chambers of Commerce and Industry in Kathmandu.
Investment Board Nepal, a government agency, had started negotiations on Upper Karnali PDA with GMR Group, the developer of the hydroelectric project, in April 2013. GMR was awarded the project, located in Surkhet, Achham and Dailekh districts, in 2008 through competitive bidding.
A deal in this regard was supposed to be sealed during Indian PM Narendra Modi’s visit to Nepal in first week of August. However, after some political parties raised objections, government decided to put the process on hold.
Then on August 4, Prime Minister Sushil Koirala and Indian Premier Modi agreed to conclude the PDA within 45 days. Around this time, a committee under National Planning Commission Vice Chairman Govind Raj Pokharel was formed to find out pros and cons of the draft PDA. Committee was given a deadline of three weeks to submit report to PM Koirala.
The deadline expired last Sunday, but the report is yet to be submitted as some of the committee members are against the proposal to provide cash incentive to export-oriented hydro projects, despite knowing the commitment was made through latest fiscal policy.
These senior government officials are arguing that cash incentive should only be extended to project developers who generate electricity for domestic purpose and not to projects like Upper Karnali, which is planning to sell 88 per cent of the electricity generated here to India.
Other officials, on the other hand, are of the view that the government should be considerate of income of Rs 5.51 billion that it would make in royalties from Upper Karnali, Rs 3.10 billion in income taxes and Rs two million in other taxes per year.
Meanwhile, there has been a delay in report submission as the committee is awaiting written comments from Finance Ministry, which would elucidate its stance on proposal to extend cash incentive to export-oriented hydro projects. As the debate is going on, the committee is expected to recommend to the government to provide the incentive as per the provisions in the ‘law of the land’.
This means fiscal policy, which is currently under discussion in the Parliament, should be endorsed without any change to provision on cash incentive. Many say this is possible as two ruling parties, Nepali Congress and the CPN-UML, have voiced support to extend the cash incentive even to export-oriented hydroelectric projects.
Source : The Himalayan Times