The government is all set to give the environmental green light to two Indian hydropower developers to acquire forest land to build their projects for which they will have to pay a fee.

The Forest Ministry will be providing forest clearance to the developers of the 900 MW Upper Karnali and 900 MW Arun-3 hydropower projects. The fee will be decided later when the ministry fixes the rates for different types of land belonging to different eco-systems, government officials said.

The ministry came up with this mechanism to provide forest land to Indian hydropower developers after they complained about delays in obtaining clearance at the third meeting of the Nepal-India Oversight Mechanism held last April in Kathmandu.

Subsequently, ministry officials at the meeting had offered an alternative where a developer would acquire the forest land first and pay the fee after the ministry has determined the rates for land in different ecosystems.

“The ministry had presented a proposal to award forest land to Indian hydropower developers at a Cabinet meeting two weeks ago,” said the Forest Ministry source seeking anonymity. “Currently, the proposal is being reviewed by the Cabinet’s Social Committee before it is endorsed.”

Once the Social Committee passes the ministry’s proposal, one of the most vexing issues in hydropower development in Nepal will be solved.   

Earlier, the ministry had asked the developers to buy an equivalent area of forest land in a similar ecosystem, create a similar forest and hand it over to the government to acquire the forest land needed for their projects. The two Indian developers complained that there was no such provision in the project development agreement (PDA) they signed with Investment Board Nepal (IBN).

Both developers have to complete financial closure of the project by September 2017, and without getting forest clearance, probable lenders will not agree to finance the project. The developer of the Arun-3 Hydropower Project has even claimed compensation from the government under the ‘change in law’ provision in the PDA for its failure to provide the forest land required to develop the scheme.

The project needs to lease 125 hectares of forest land to build an access road and implement the civil works of the hydropower project.

As per the laws prevailing at the time the PDA was signed, the project developer has to pay lease fees to the government and plant double the number of trees that are cut down on the leased land.

After the Forest Ministry asked the developer to buy an equivalent amount of land and create a forest on it, the developer refused. The ministry’s demand is based on an upcoming guideline governing the acquisition of forest land for infrastructure development. Instead of complying with the ministry’s demand, the Indian developer dispatched a letter to IBN seeking compensation by invoking the ‘change in law’ clause in the PDA.