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Upper Karnali Hydro Project: IBN board okays PDA

  • Cabinet to endorse revised document before PM leaves for UN meet
- SANJEEV GIRI, KATHMANDU
Upper Karnali Hydro Project: IBN board okays PDA

Sep 18, 2014-

Wrapping up several rounds of negotiations, a board meeting of the Investment Board Nepal chaired by Prime Minister Sushil Koirala on Wednesday finally endorsed the project development agreement for the 900 megawatt Upper Karnali Hydropower Project.

The board instructed the IBN to make some amendments to the PDA document. The approval follows understanding reached between coalition partners Nepali Congress and CPN-UML that the agreement should be approved by the Cabinet before the PM leaves for the United States on Friday.

Top leaders of both the parties, including PM Koirala, had an informal meeting before the IBN board met on Wednesday since the UML had some reservations about the document. UML leader Bhim Rawal on Monday had forwarded to the IBN a list of 14 points on which the party wanted more clarity.

According to IBN sources, it will amend the PDA document as directed by its board and forward it to the Cabinet for final endorsement. Before that, the IBN will also sit with the developer, India’s GMR ITD Consortium.

The Cabinet nod will finally pave the way for the IBN and GMR to sign the PDA for the Rs 140 billion Upper Karnali project. The GMR signed a memorandum of understanding with the Nepal government in 2008 for developing the project.

The development is seen as a major breakthrough as it sets the tone for more foreign investments in the hydropower sector. Two more foreign developers—Satluj Jal Vidyut Nigam and Statkraft—have been keenly watching the Upper Karnali PDA as a similar template would apply to their PDA negotiations. The Satluj and Statkraft are also in talks with the IBN for Arun 3 and Tamakoshi 3, respectively.

Top officials said the contention has been addressed and the IBN will amend the document accordingly. “Most of the issues were sorted by altering words in the PDA document,” said Govinda Pokhrel, vice-chairman of National Planning Commission. There had been some minor changes to the PDA draft prepared by a technical committee headed by Pokhrel himself.

Energy Minister Radha Gyawali said several issues were clarified and points that were a bit confusing were revised in the board meeting.

Officials say Rs 5 million per MW VAT exemption to the developer has been approved. As per an estimate, GMR will get Rs 4.5 billion in tax rebate. However, the incentive will be invalid if the project fails to be completed by the fiscal year 2022-23.

On the impact on downstream irrigation projects, the IBN board decided that the developer should carry out a study within six months of PDA signing to ascertain the impact. Based on the study, GMR will have to take measures to ensure the required flow of water to the irrigation projects and construct the re-regulating dam on its own.

The meeting also agreed to make some changes to the force majeure provision. While the document states the government would make monetary compensation in case of disturbances caused by the government or due to instability, the revised agreement will read the government allocates more time for construction rather than compensating the developer in cash.

Deal to cheer investors: Koirala

Prime Minister Sushil Koirala hoped the agreement will convey a positive message to investors at home and abroad that Nepal is a good destination for investment. Koirala said he expects full cooperation from the political parties and stakeholders. (PR)

Published: 18-09-2014 08:21

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