The Parliamentary Public Account Committee (PAC) on Sunday gave the greenlight to the Nepal Electricity Authority (NEA) to pay variation costs to the contractor of the Chameliya Hydropower Project, paving the way for early resumption of construction works at the project.

The 30MW project has been stalled for more than a year, with its contractor—Gezhouba Water and Power Company—suspending all construction works after being denied payment for the variation orders during the tunnel digging. Variation is created when the contractor has to do extra works not mentioned in the contract. 

In July 2014, the PAC had ordered the NEA to halt payment, citing possible misuse of funds, and insisted that an investigation be launched before releasing the money to the contractor.  

The NEA board had decided to make payment of more than Rs 1.09 billion in variation charges—the biggest among several variations at the project. The resultant cost overrun made Chameliya the most expensive hydropower project, with cost estimated to hit Rs500 million per megawatt. 

The PAC meeting on Sunday directed the government to pay the variation charge to the contractor after proper evaluation.

Surendra Aryal, under secretary at the PAC, said that the House panel had taken the decision as it was considered as a hindrance to the development of the project located at remote Darchula district. The PAC has also instructed the government to accelerate the construction works to complete the project soon. 

While the works at the Chameliya has stopped for more than a year over the variation costs, other hydropower projects being developed by the NEA are facing a delay due to the shortage of construction materials and fuel. With people increasingly using electricity now, the delay at the under-construction projects is likely to exacerbate the energy crisis in the country. Given the prolonged halt to the construction works, another parliamentary body—Agriculture and Water Resource Committee—has expressed concerns over the issue and sought amicable solution to the problem. 

Speaking during Sunday’s meeting, Deputy Prime Minister and Energy Minister Top Bahadur Rayamajhi welcomed the PAC decision, calling on the panel to cooperate in completing the project which is at its final stage.

Earlier, a PAC sub-committee headed by lawmaker Rajendra KC had concluded that there had been irregularities of Rs550 million at the project. The costs of construction materials, manpower and equipment were highly inflated, a PAC study had found out. 

It also reported that the NEA board had approved the variation order 6 of the contractor, bypassing the Variation Review Committee under Project Development Department (PDD).  

The NEA has already paid more than Rs 2.5 billion in variation orders to the project contractors. Consequently, the project cost has now spiralled to Rs 15.06 billion from the initial Rs 8.49 billion, according to the PAC.