Print Edition - 2016-04-26 | MONEY
Protest delays allotment of Upper Karnali shares
The 900 MW project spread across Surkhet, Achham and Dailekh districts in western Nepal will displace about 239 households
Apr 26, 2016-The government has been putting off allotting shares of the Upper Karnali Hydropower Project to locals that will be affected by its construction due to strong opposition from regional political leaders including a cabinet minister, sources said.
The 900 MW project spread across Surkhet, Achham and Dailekh districts in western Nepal will displace about 239 households.Last January, the Energy Ministry had presented a proposal to the Cabinet to issue shares worth Rs1.6 billion to locals as per the recommendation of Investment Board Nepal (IBN). The shares will be allocated from the 27 percent stake that the government is getting from GMR India, the project’s builder.
As per the Project Development Agreement (PDA) signed between IBN and India’s GMR-ITD Consortium, the Nepal Electricity Authority (NEA) will get 27 percent of the shares and 12 percent of the electricity generated free of cost. Sources said the Cabinet was undecided due to objections from a cabinet minister.
Those against issuing shares to locals say that it will diminish the NEA’s say in the project as its stake would fall below 25 percent.
“A cabinet minister from the region is of the view that if shares worth Rs1.6 billion are allotted to the local people, the NEA’s equity holding will drop below 25 percent, leaving it without influence in decision making,” said an IBN source. “The minister also fears that GMR-India will buy back the shares from locals allowing it to increase its holdings to more than 75 percent and run the project unilaterally by passing special resolutions.”
According to Company Act 2006, a shareholding of 25 percent or less is considered as a minority holding, and the holder of 75 percent or more of the shares has the right to pass special resolutions.
Section 83 of the act states that special resolutions can allow a company to make crucial decisions like increasing the authorized capital, decreasing or altering the share capital, altering the name or main objectives, amalgamating one company with another and issuing bonus shares, among others.
Meanwhile, IBN sources said that there was no need to worry about such unilateral decisions because the PDA signed with GMR protects the NEA’s rights regardless of the size of its shareholding.
Meanwhile, the parliamentary Agriculture and Water Resources Committee has directed the government to immediately approve the Energy Ministry’s proposal regarding the number of shares to be allotted to locals.
According to committee chairman Gagan Thapa, issuing shares to locals will keep them happy and help prevent possible disruptions at the local level. Sources at the Prime Minister’s Office said that the share allotment proposal will be discussed at the next Cabinet meeting.
According to IBN, shares will be issued to locals after the project is completed. “As the project will provide jobs to more than 2,000 locals, they will be able to purchase the shares from their own earnings,” said the IBN source. “Also, the government will come up with some mechanism enabling locals to buy the allotted shares.”
The Upper Karnali project is targeted to be completed by 2021 at an estimated cost of Rs145 billion. It will acquire 48.85 hectares of private land and 207.75 hectares of government-owned land. An estimated 239 households will be affected.
Published: 26-04-2016 08:36