Upper Karnali PDA unlikely within deadline again

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    way-to-pdaKATHMANDU: It appears the government and GMR Group will not be able to sign the Project Development Agreement (PDA) on 900MW Upper Karnali hydroelectric project within the deadline of 45 days extended by Prime Minister Sushil Koirala.

    The deadline jointly extended by PM Koirala and Indian Premier Narendra Modi, during Modi’s visit to Nepal in the first week of August, is expiring on September 17, but the government and the Indian multinational company have not shown signs of entering into the deal.

    The Investment Board Nepal (IBN), which is negotiating with GMR Group on behalf of the government, called a board meeting today to discuss the issue. But it ended inconclusively.

    “We could not take any decision today, as board members said they’d want to go through the report prepared by the high-level committee formed under National Planning Commission Vice Chairman Govind Raj Pokharel,” an IBN source said. “The members have agreed to meet again tomorrow or day after tomorrow.”

    The 13-member high-level committee, comprising Chief Secretary Leela Mani Paudyal, Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada and secretaries of various ministries, was formed on August 2 after some of the ruling party members objected to signing of the PDA during Modi’s visit to Nepal.

    The high-level committee’s meetings focused largely on two issues.

    First was on the impact the hydroelectric project could have on irrigation projects like Rani-Jamara-Kuleriya, Rajapur, Surya Patuwa that lie downstream of the project site. The committee has instructed IBN to deploy a team to conduct a study on it within six months of signing the PDA.

    “We hope the technical team will be able to report on the magnitude of the problem and recommend measures that should be taken to minimise the risks, as a lot has been said based on assumptions,” IBN CEO Radhesh Pant told the Parliamentary Committee on Agriculture and Water Resources today.

    Pant, however, did not say anything on the other issue that was heavily debated during the committee’s meeting: the proposal to extend one-time cash incentive of Rs five million for every megawatt of electricity produced by the project.

    Chief Secretary Paudyal and NRB Governor Khatiwada are against this proposal as they have argued the incentive should only be given to projects that generate electricity for domestic consumption.

    Upper Karnali project is an export-oriented hydro project, which intends to sell 88 per cent of the electricity in India.

    Although the project developer has pledged to sell up to 50 per cent of energy to Nepal, if needed, senior bureaucrats like Paudyal and Khatiwada have stood against the proposal to extend cash incentive to the project.

    Earlier, the IBN had asked the Ministry of Finance (MoF) to make its stance on cash incentive clear after the high-level committee did not give clear instruction on the matter and recommended that the cash incentive be extended as per the law.

    The fiscal policy of this financial year, introduced in July, has pledged to provide ‘a grant of Rs five million for every megawatt of electricity generated and evacuated to the national grid’. But since the document is still being discussed in the Parliament and therefore not converted into law, IBN wants a commitment from the MoF on the issue.

    However, Lawmaker Shiva Chandra Chaudhary today told the parliamentary committee that the government was confusing people by referring to rebate on value added tax (VAT) as cash incentive.

    “Rs five million that the government is extending for every megawatt of power generation is actually VAT rebate being extended to project developers. This means the state will be returning only a part of the fund extended by project developers in the form of VAT. If the government could explain this properly, there won’t be any debate on it,” Chaudhary said.

    Source : The Himalayan Times