Troubled waters

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    For a nation that suffers from acute power shortage, Nepal is also fast earning the reputation of a country that invites foreign direct investment (FDI) on paper and then drains out the efforts and expectations by flooding the investors with paper work and bureaucratic hassles. The power games in the hydro energy sector is nothing new and so, yet another project finds itself entangled in hassles and uncertainty.

    This coming Tuesday, the Supreme Court will decide the fate of the Upper Trishuli I, 216-MW hydro project after issuing a one-week stay order, barring work last Wednesday. The court’s order came in response to a writ petition filed by three lawyers against the government’s decision to restore the survey licence of Nepal Water and Energy Development Company (NWEDC). The petitioners have named the prime minister and his office, the co-coordinator of the Cabinet’s Economic Infrastructure Committee (EIC), the Ministry of Energy (MoE), the MoE secretary, the director general of the Department of Electricity Development, and NWEDC as defendants. These developments took place against the backdrop of certain events.

    A month ago, the Energy Ministry had scrapped NWEDC’s licence for not completing certain assigned tasks on time, particularly for its failure to sign connection and power purchase agreements with the Nepal Electricity Authority and conclude an Environmental Impact Assessment (EIA). About a week ago, after reviewing the case, EIC decided to restore NWEDC’s licence for the next 18 months, stating that NWEDC had made progress in the project development.

    Power play

    The cliché, Nepal has immense potential for hydro power but that holds no meaning if it cannot be tapped. Yet for reasons known and unspoken about, this sector continues to be highly politicised and a feeding ground for those who benefit from fishing in troubled waters. An interesting complication in the fact that local newspapers also reported that officials at the MoE had plans to give the licence to IDS and Hydro China Company just two days before NWEDC’s licence was cancelled and Secretary Hari Ram Koirala had asked Hydro China and IDS to apply for the licence. When contacted by THT Perspectives, Koirala politely refused to make any comments at all.

    For hydro projects, hurdles are not new and present themselves in most uncanny ways. NWEDC’s problems started soon after it received survey licence in 2007. The CIAA asked the government to cancel the licence, according to Bikesh Pradhananga, the Nepali promoter of the project. Two years later, the company won the battle in court but conflict between the MoE secretary and then minister further delayed renewal of their licence by another six months. Despite all these odds, the project moved on and applied for generation licence. But problems, delays and complications continue to surface, which only shows the need for more trans-parency and clearer policies that protect investment and provide incentives for investors without whom our power generation potential, will remain mere potential.

    Problems aplenty

    While it is imperative that those holding licences and doing sweet nothing not be granted licence or extensions, does it make sense to penalise those that have already invested and are sincere in their efforts? Dr Subarna Das Shrestha, president of the Independent Power Producers Association, Nepal says, “Upper Trishuli applied for generation licence, which means they completed the survey phase and entered construction phase. When one applies for generation licence, it means one has completed the groundwork and also arranged the funds for construction, either locally or by involving FDI.”

    “Revoking the licence in a phase where one applies for generation licence is unfortunate and in this case it is noted that DOED had also accepted their EIA report. Licences of those who merely hold projects need to be scrapped, but stalling a project that is ready to enter construction phase makes no sense.”

    He feels that the issue is being hyped and dragged on unnecessarily. “There have been claims that hydro projects can conduct feasibility studies in two years and complete other works like power purchase agreement, financial closure, et cetera in the remaining three years. But that is quite impractical in many instances. We also have precedents where the government has granted additional time for some hydro projects to complete necessary work by issuing conditional generation licence,” he informs. Gyanendra Lal Pradhan, chairman of Hydro Solutions says, “The government should first play the role of a facilitator before that of a regulator. For a country with tremendous hydro-power potential, 216 MW may not be a great issue, but the government mechanism of issuing license and cancelling it creates confusion.”

    Bo-Seuk Yi, general manager of Korea South East Power Company is concerned about how things are playing out. There are 15 engineers in Kathmandu and 34 in Seoul working on construction design, he informs. He says that last year when the CEO of his company was in Nepal to finalise the deal, he was welcomed by the then Minister who had promised full support for the project. “We’ve already invested almost USD 1.5 million and USD one to two million per month in the last few months. We’re ready with finance of another USD 20 million for the next stage. We’re very serious about this project and chose this over projects by local promoters because of professionalism of NWEDC and the location,” he says, adding, “We didn’t  expect such problems. And if this is the kind of problems we have to face, why were we invited to invest in Nepal?”wrong signalsWith the fate of the Upper Trishuli I, which was billed as ‘hallmark project’ hanging in the balance, should NWEDC’s licence be revoked, it will open up a Pandora’s Box of issues that will not benefit Nepal in the Investment Year. The project will  require new bids and proposals. A project that is scheduled to begin construction in 2013 and generation of power for domestic consumption in 2018 will land in limbo. “A single mistake of discou-raging a venture would send a negative message not only in the hydro sector but also to the entire national economy. Coming in of FDI will then be a far-fetched dream,” says Shrestha.

    With FDI being promoted and potenial investors watching developments closely, this could send all the wrong signals. The question to be asked is, who gains if NWEDC loses this project?

    The nation will have to pay the price.

    Source : The Himalayan Times