The government has decided to award the contract to construct the Budhi Gandaki Hydroelectric Project to China Gezhouba Group Corporation (CGGC).

A Cabinet meeting on Tuesday approved the Energy Ministry’s proposal in principle to let the Chinese company build the 1,200 MW project under the engineering, procurement, construction and finance (EPCF) model of project development.

The meeting also approved the draft memorandum of understanding (MoU) to be signed with CGGC. The MoU, according to Energy Minister Janardan Sharma, is a preliminary accord and it will not bind the government legally or financially without entering into a separate agreement.

“As per the pact, CGGC will get a year to make an assessment of the hydropower project and arrange funds for its development,” said Sharma. “If the Chinese developer comes up with a proposal agreeable to us, we will sign another contract.”

The EPCF model of project development, under which the contracting firm makes all the arrangements including the funds to build the project, is considered to be one of the most effective models for the development of huge infrastructural projects.

Currently, the Finance Ministry is in the process of preparing the guideline for the EPCF model of project development. After it is published, there will be more clarity on how the model works. 

A highly placed source at the Energy Ministry said that the Chinese government was very keen on having a Chinese company develop the project, and had inquired about it with Prime Minister Pushpa Kamal Dahal during his recent visit to China.

Chinese officials had even pledged to provide a soft loan via the Export Import Bank of China to the Chinese company to build the project if it is awarded the contract, the source added.

Subsequently, Dahal initiated the process to engage CGGC for the development of the Budhi Gandaki Hydroelectric Project, one the most strategic hydropower projects in the country. The storage type project will be built on the Budhi Gandaki River in Gorkha and Dhading districts.

CGGC is currently engaged in developing the 30 MW Chameliya Hydropower Project in the far west and the 60 MW Upper Trishuli 3A Hydropower Project in the Central Region. 

The Budhi Gandaki has been touted as a key project to resolve the perennial power crisis in the country. The government has allocated a budget of Rs5.33 billion for the project’s development for this fiscal year. The government has been charging an infrastructure tax of Rs5 per litre on petrol, diesel and aviation fuel to collect funds for the project’s construction.

The project is presently engaged in acquiring land. The district administration offices of Dhading and Gorkha, the project affected districts, are currently distributing compensation to the owners of the land required for the construction of the project.

More than 8,000 households will be affected by the project, according to the latest report. The report states that the reservoir of the storage project will submerge 3,560 houses, so the residents will need to be resettled to an alternative location with proper compensation.

Likewise, 4,557 houses will be partially affected by the project, and proper compensation will have to be paid to the owners. The project is expected to cost Rs250 billion.