The central bank is to provide refinancing facility to flood-damaged hydel projects

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Nepal Rastra Bank, the central bank, has agreed to extend the refinancing facility to hydropower projects damaged by floods and landslides in eastern part of the country on June 15 and 16. As many as 13 hydel projects already in full operation and 17 others under construction were heavily damaged, incurring a loss of around Rs 9 billion. In a tripartite discussion held among representatives of the Independent Power Producers’ Association Nepal (IPPAN), Nepal Bankers’ Association (NBA) and the central bank on Tuesday, a joint decision was made to refinance the flood-affected hydel projects, which were generating around 150MW of electricity. The floods and landslides also damaged transmissions lines, developed by Nepal Electricity Authority (NEA), along the major river corridors. During the meeting, IPPAN officials had requested the central bank to facilitate refinancing, interest capitalisation and loan restructuring for the flood-damaged projects. The IPPAN also requested the banks not to stop paying dividends even if the interest is capitalised as the banks had pressured the stakeholders to repay the loan when th required commercial operation date of some projects damaged by the flood had exceeded.

Earlier, the central bank had issued a directive not to distribute dividends even if the interest income can be shown as a profit until the hydropower projects start production. Profits of investing banks have been decreasing as they have to provide provision of 12.5 per cent of the loan amount while restructuring them. IPPAN has requested that arrangements be made for dividends to be distributed from the income even if interest is capitalised and remove the provision requiring additional amounts. In response to IPPAN’s request, the central bank said it was ready to refinance the projects damaged by floods throughout the reconstruction period, and interest capitalisation and loan rescheduling would also be facilitated. The central bank has also told the promoters to set aside some capital for the reconstruction of the damaged projects. Power producers have also alleged that the funds secured from the insurance companies had to be used to pay interest to the banks. The private sector power producers have also asked the banks to reduce the risk of burden of the already operational projects and make it easier to raise investment for new projects.

Recently, many insurance companies have shown reluctance to buy insurance policy of hydel projects, citing their high risk of natural calamities, a situation which has added an additional burden to the hydropower promoters. Even after the commercial operation of the power plants, NEA does not buy the whole energy produced by them, citing lack of proper transmission lines and sub-stations. However, NEA is fully utilising its power plants and others built under foreign investment, while forcing the domestic power producers to generate energy at below-capacity during the wet season. Refinancing the flood-damaged hydel projects is not enough, NEA must be ready to buy energy from the independent power producers at full capacity as per the Power Purchase Agreement (PPA) under the ‘take or pay’ principle. Banks have made investments in hydropower projects as per their PPA with NEA, which must abide by it.

HoR obstructions

It is unfortunate that not a single new law has been formulated in the last eight months due to frequent obstructions in the House of Representatives (HoR). This begs the question, why is there this mammoth HoR when the members cannot carry out their main duty, that is, making laws. The general elections were held on November 20 that elected 275 members under the direct and proportional representation systems.

Since the elections, the HoR has held 45 meetings, of which 28 were held during the first session from January 9 to April 28. Although the first session saw no disruptions, the budget session, which started on May 7, has been disrupted multiple times. The House has been obstructed time and again by the opposition or fringe parties over numerous scandals that have rocked the country. First there was the fake Bhutanese refugee scam, followed by the Lalita Niwas scam and now the gold smuggling case. In between, unthoughtful utterances by the prime minister generated much heat in the parliament. At a time when the people are questioning why Nepal needs so many lawmakers, it behooves the Members of Parliament to stop creating pandemonium in the House and get down to business.

Source: The Himalayan Times