Upper Karnali project once again faces uncertainty

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    KATHMANDU, July 29

    Upper Karnali HEP
    Karnali River

    The 900 MW Upper Karnali Hydropower Project has once again faced uncertainty after the latest Supreme Court order.

    The project with an estimated cost of around Rs 90 billion is once again facing uncertainty after the single bench of Justice Bharat Bahadur Karki ordered not to proceed ahead with the power development agreement (PDA) negotiation with GMR Upper Karnali Hydropower Limited. GMR and Italian Thai Development Company Limited (ITD) of Italy have jointly invested in the project.

    The Investment Board (IB) is holding talks with the Indian power developer for signing PDA. The then Ministry of Water Resources, now Energy Ministry, had awarded the project to GMR in build-own-operate-transfer (BOOT) model after the company expressed commitment to provide free energy and equity to the government during an international free competition. Hydropower promoters fear that foreign direct investment (FDI) coming to the hydropower sector can also be affected as projects are obstructed due to various reasons and warn that foreign investment will not arrive in Nepal if the situation persists. Chairman of the Hydroelectricity Committee of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Gyanendra Lal Pradhan says the recent development can force GMR and the Italian company to abandon the project and accuses that a conspiracy to chase GMR away has started with vandalism and obstruction at the project site and dragging the company to the court.

    “GMR has already guaranteed 39 percent free stake to Nepal providing 27 percent of free equity and 12 percent of free electricity after the project is completed. No other company in the world has offered such benefits to the state. The company is also bringing Rs 80-90 billion into Nepal which will provide relief to the country when we are forced to buy Indian currency by selling the US dollar,” he argues. President of the Independent Power producers’ Association, Nepal (IPPAN) Dr Subarna Das Shrestha claims that obstruction of works at the project will send negative message to international investors. “The country’s esteem is affected when works of the project that has been handed over in a transparent manner through free competition is obstructed,” he states. “The government and the authorities concerned must play a facilitatory role to move the project forward,” he urges. He says foreign investment done according to the prevailing laws should not be discouraged at a time when the country needs investment.

    Chief Executive Officer of IB Radhesh Pant demands that an environment should be created to move the project forward as the agreement with GMR provides great benefits to the country. He says the talks for PDA with GMR have been stalled after the recent interim order by the Apex Court. Joint secretary at the Energy Ministry Anup Kumar Upadhyaya opines the project has been affected due to conflict of different interest groups. “They are currently trying to chase away GMR,” he claims.

    Project work has been obstructed repeatedly in the name of public stakeholders society. The Supreme Court had earlier ordered that the agreement between the government and GMR need not be approved by two-third majority of the parliament. Stakeholders state that the problem has also arisen as the locals have not been informed of the benefits provided by GMR. Nepal will get 108 MW (440 million units a year) from the day the project comes into operation as per the agreement signed on January 24, 2008. Similarly, free equity of 27 percent, equivalent to around Rs 9.33 billion, will also be provided. Nepal will earn US$ 2.80 billion during the contract period and billions of rupees from royalty.

    The Nepal Electricity Authority (NEA) and GMR signed joint investment agreement in February, 2008, the Ministry of Industry gave permission for foreign investment in April, 2008, and the company was formed in the same month. GMR had submitted the Detailed Project Report (DPR) in May, 2010. While the license was initially issued for generation of 300 MW it was later upgraded to 90 MW. Only the Upper Karnali project has been obstructed recently. The state is not guaranteed free electricity and equity in Mid Marsyangdi II (600 MW) project also constructed by GMR. Mid Marsyangdi II and other projects have not been obstructed now. The project has also been delayed as the Energy Ministry has failed to sign PDA in time.

    NEA can procure additional 10 percent of electricity apart from the free electricity from the project that originally planned to export electricity to India. The project lies in Dailekh and Achham districts in Far West. The BOOT period for the project is 30 years after which the company must handover the project at an operational state to the government for free.

    Source : Karobar Daily