Indian companies constructing hydropower projects in Nepal have complained about the delay in issuing permission to clear forest land at a meeting of the Nepal-India Oversight Mechanism held on Wednesday.

Speaking at the third meeting co-chaired by Foreign Secretary Shanker Das Bairagi and Indian Ambassador Manjeev Singh Puri, the developers of the 900 MW Upper Karnali and 900 MW Arun 3 hydropower projects said they would not be able to acquire the forest land they need under the Foreign Ministry’s current policy.

As per the existing provision, project developers have to buy equivalent non-forest land in the same type of ecosystem, plant a similar forest on it and hand it over to the government.

In response to the complaint, a Forest Ministry official offered an alternative plan under which developers would be able to acquire forest land after paying a certain amount of money. The cost of the land will be determined after the Forest Ministry has created a replacement forest. 

According to Maheshwar Dhakal, joint secretary at the Forest Ministry who was present at the meeting, it will take some time to make such a provision effective. As of now, the ministry hasn’t fixed the prices for different types land belonging to different eco-systems.

“Even If we work at a rapid pace, it will take around six months to prepare such guidelines,” said Dhakal. “After that, we have to get approval from various ministries and the Cabinet. Therefore, it will definitely be some time before such guidelines come into effect.”

Indian hydropower developers said delays in creating such provisions would push back the project implementation date. “If they bring the guidelines after six months, it will take a minimum of nine months to one year to get forest clearance,” said an Indian developer seeking anonymity. “This will seriously affect our construction timeline.”

Both developers have to complete the financial closure of their projects by September 2017; and without getting forest clearance, probable lenders will not be willing to finance them.

The developer of the Arun-3 project has even claimed compensation from the government under the ‘change in law’ provision in the project development agreement (PDA) for its failure to provide the required forest land.

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 at 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 Investment Board Nepal seeking compensation invoking the ‘change in law’ clause in the PDA.