Almost all energy-related projects are facing time and cost overruns.

Hydropower projects like Kulekhani III, Chameliya, Rahughat, Upper Trishuli 3A, Upper Tamakoshi and transmission line projects like 220Kv Khiti-Dhalkebar and 400Kv Dhalkebhar-Muzzaffarpur transmission line are some of the major projects facing time and cost overruns, according to the Nepal Portfolio Performance Review (NPPR) 2015 prepared by the Ministry of Finance.

Nepal Electricity Authority’s (NEA) centralised and lengthy procurement processes, contractor’s tendency of leaving work midway, inexperienced and financially-weak contractors and issues related to land acquisition and forest clearance resulted in low disbursement of resources and extension of projects multiple times, the NPPR stated.

The delays have also contributed to severe power cuts, compelling commercial and industrial entities to operate costly diesel generators.

“Project management has always been an issue in Nepal. When there is a time overrun, cost overrun cannot be averted,” said NEA Managing Director Mukesh Kafle. “Apart from managerial issues, contractual obligations and socio-political issues are hindering the energy development.”

He said all the projects have their own issues and challenges which are complicated in nature.

The original contract period of the 14MW storage-type Kulekhani Hydropower Project, which has scheduled to be completed by December 2011, has been extended by 44 months so far. Around 92 percent of civil works and 45 percent electro mechanical works have been completed as of July 2015.

The government-funded Chameliya project (30MW) started in 2007 and was expected to complete by 2011. It has also seen two deadline extensions—first until March 2015 and latest until March 2016. The project is 94 percent complete.

Kafle said Kulekhani was delayed as the contractor failed to execute works as per the schedule. “Due to some contractual obligations, NEA is not being able to take action against the contractor,” he said.

Besides some contractual issues and variation in quality, massive corruption also played its part in delaying Chameliya. An investigation by the Parliamentary Public Accounts Committee (PAC) investigation has shown embezzlement of Rs550 million in the “Variation Order No 6” alone.

In July, a Nepal Electricity Authority (NEA) board meeting had approved the biggest variation order of Rs1.09 billion to China Gezhouba Water and Power (Group) for tunnel squeezing treatment work.

With such a massive rise in the variation order, the project cost has now swelled to Rs15.06 billion from the initial estimate of Rs8.49 billion. With an estimated production cost of Rs500 million per megawatt, the project is set to become the costliest ever undertaken by the NEA.

The 456MW Upper Tamakoshi Hydropower Project, one of the national pride projects being developed by NEA subsidiary Tamakoshi Hydropower Limited, has achieved overall physical progress of 76.2 percent, with a financial outlay of 72.7 percent at the end of 2014-15. As of August 2015, 85.3 percent of the headworks has been completed. The project now is expected to complete by July 2017.

The completion date of 60MW Upper Trishuli 3A project too has been extended by 26 months. The project was expected to be completed by April 2014. However the progress made so far suggests the project will be completed by June 2016. The first hydropower project developed with loans from China Exim Bank landed in controversy after its contractor tried to increase its capacity to 90MW which also caused delays.

The Rahughat project, being constructed with loans from India Exim Bank, terminated contract with Indian contractor in June 2015 and is now preparing to award the contact to a new company by 2016 with a completion deadline of 2020.

The previous contract, awarded in November 2010 with a 42-month construction period, was terminated as the contractor could not work due to lack of funds.

As far as the transmission line projects are concerned, Kafle said they were facing socio-political issues like right-of-way and land acquisition.

The Khimti-Dhalkebhar transmission line project, whose construction started in 2004-05, is still incomplete. So far, erection of 178 towers

has been completed, while foundations of 181 towers have been laid.

“The project could not conclude even in 10 years as locals obstructed works in a few places demanding higher compensation for their land. Complications related to just eight towers delayed the project for such a long time,” Kafle said, adding the NEA has resolved the issue and that the project is on track.  

The Dhalkebar-Muzaffarpur transmission line project is expected to complete by September 2015. However, since the new interconnecting substation at Dhalkebhar will not be completed by 2015, it will have to be operated through old 132Kv substation.

Delayed hydropower projects

Projects    Original deadline    Extended deadline

Kulekhani III    Dec 2011         March 2016    

Chameliya    DEC 2011     March 2016

Rahughat        May 2014         Dec 2020

Upper Trishuli 3A    April 2013         June 2016

Upper Tamakoshi    July 2016         July 2017