Politics‚ technical glitches stall PDA signing

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    way-to-pdaKATHMANDU:  Little bit of politics and confusion on some technical nitty-gritty stalled signing of Project Development Agreement on 900 MW Upper Karnali hydroelectric project, according to those who attended an Investment Board Nepal meeting yesterday.

    IBN could not endorse the draft of the PDA after a few ministers of the CPN-UML expressed reluctance and said the deal should not be sealed in haste.

    The IBN has been negotiating with India-based GMR — which was awarded the project in 2008 through competitive bidding — since April 2013 to finalise the PDA document. And it desperately wanted the agreement to be signed during Indian Prime Minister Narendra Modi’s visit to Nepal, as it would have set a precedent on matters related to export-oriented hydro projects and demonstrated that the country was open to investors who wished to build hydro projects here and sell power abroad.

    “But after a few ministers objected, a decision to form a committee was taken,” a source said.

    To deal with all contentious issues, a powerful committee comprising chief secretary, Nepal Rastra Bank governor, secretaries of home, finance, energy, irrigation, forest, environment and land development ministries, and IBN CEO has been formed. The committee, headed by National Planning Commission Vice Chairman Govind Raj Pokharel, has been given one month’s time to submit a report, according to a high-ranking official of the IBN.

    If everything goes according to plan, the PDA would be signed in the next 45 days, the official said. 

    One of the concerns raised by various political parties is the impact the Upper Karnali project will have on irrigation projects located downstream of the project site. Upper Karnali project, located in Surkhet, Achham and Dailekh districts, falls on the same river where Rani-Jamara irrigation project is being developed. 

    As per Upper Karnali’s power generation plan, 90 per cent of water will have to be blocked for 18 hours a day and stored in a pond. The water will be released for six hours beginning 6pm every day. The water released by the hydro project is expected to take around 24 hours to reach Chisapani, area where Rani-Jamara irrigation project is being developed.

    “Since water reaches in the evening, it will be inconvenient for farmers to irrigate their farmlands as they prefer to water their fields in the morning,” Unified CPN-Maoist leader Lila Mani Pokharel said.

    IBN said it was also aware of this problem. “That’s why the draft PDA says a team would be formed to properly address this issue…. This matter alone should not have stopped us from signing the agreement during Indian Premier Modi’s visit,” an IBN source said.

    But this was not the only bone of contention.

    Few have also started saying the project also breaches the upstream rights.

    Although the project developer has agreed to allow anyone to develop hydro projects upstream of Upper Karnali hydroelectric project site, others say the draft PDA does not allow development of projects for the purpose of consumption. “We cannot build irrigation projects upstream of Upper Karnali project site,” Pokharel said.

    But IBN sources beg to differ. “We can build any type of project upstream. But such projects shouldn’t significantly reduce water flow to Upper Karnali hydro plant and affect electricity generation,” the source said, adding, “These irrational arguments indicate anti-development forces are becoming influential.” 

    Another issue raised by those opposing the signing of the pact is tax holidays extended to hydropower project developers through this fiscal’s budget.

    The fiscal policy of this financial year offers to exempt hydro project developers, who generate and connect electricity to national grid and export it within fiscal 2022-23, from income tax for first 10 years and provide income tax discount of 50 per cent for another five years. 

    The fiscal policy also offers to provide a grant of Rs five million on every megawatt of electricity that is generated and connected to national grid. Grant is being given as compensation against value added taxes paid by hydro project developers.

    Few politicians are now saying income tax holidays and grants should not be given to export-oriented projects that ‘do not make significant contribution to country’s development’.

    IBN sources, on the other hand, said this thinking was short-sighted as the project is being built under build, own, operate and transfer (BOOT) model and would be returned to the government after 25 years. 

    Source : The Himalayan Times