The 30th board meeting of the Investment Board Nepal (IBN) held on Saturday has decided to award generation license for the Arun-3 Hydroelectric Project to Indian firm, SJVN Arun-3 Power Development Company.

The same meeting also extended the project’s financial closure deadline by six months following expiry of the previous deadline in March. The 900 MW run-of-the-river scheme is located in Sankhuwasabha district in north-eastern Nepal. 

The meeting held under Prime Minister KP Sharma Oli, who is also the IBN chairman, decided to award the license to the Indian company before Indian Prime Minister Narendra Modi’s two-day visit to Nepal beginning May 11. Modi and Prime Minister Oli will jointly lay the foundation stone of the hydropower plant remotely.

The foundation stone laying ceremony was originally planned for April when Prime Minister Oli visited New Delhi. The ceremony was put off after Nepal said that preparatory work had not been completed. According to multiple sources, Nepal sought to defer the scheduled programme as the project’s generation licence, which allows the company to produce energy, had not been issued.

The IBN’s 29th board meeting held on March 9 had decided to direct its CEO to publish a 35-day public notice stating the intent to award the licence to the Indian firm. No claim was filed or concern was expressed against the development of the project during the 35-day period, which paved the way for the IBN to issue the generation license. SJVN had applied for the generation licence around one and a half months ago.

SJVN has so far hired a contractor to implement the first package of the civil work that includes construction of a dam, diversion tunnel, headrace tunnel and intake tunnels.

The contractor has also mobilised a team to the dam site. The project developer is in the process of hiring contractors to build a powerhouse and transmission lines, and to execute the electro- and hydro-mechanical works.

In November 2014, the IBN signed an agreement with Indian government-owned SJVN for development of the Arun-3 Hydroelectric Project. The plant is slated to come online by 2020 as per the accord.

But the timeline is unlikely to be met as the financial closure deadline has been pushed back twice by one year and six months, respectively. The project has completed major tasks like acquisition of private land and is in the process of acquiring public forest land.

According to the IBN, Nepal will receive Rs348 billion over 25 years from the project.

The project developer will also provide 21.9 percent of the energy free of cost, which is worth Rs155 billion, plus another Rs107 billion in royalties.