The government is yet to fix the development modality for the $2.5-billion Budhi Gandaki Hydropower Project even though construction is supposed to start this fiscal year, raising concerns that the completion date will be pushed further into the future.

Unveiling a white paper on the energy sector last May, the Ministry of Energy, Water Resources and Irrigation (MoEWRI) claimed that the long-delayed project would be started within the current fiscal year ending mid-July 2019. However, it is yet to come up with an implementation method for the project which underwent a change of plan with every change in government.

The previous government led by Sher Bahadur Deuba had cancelled the deal with China Gezhouba Group Corporation (CGGC) made by the prior government led by Pushpa Kamal Dahal in a bid to develop the project on its own. The current government, however disowned the the Deuba-led government’s plan with no alternative plan of its own to take the project forward.

On February 9, the Sher Bahadur Deuba administration decided to build the project on its own by providing Rs94 billion in viability gap funding (VGF). But it did not happen as the government changed within the week even before the decision could be minuted.

The MoEWRI said it was working to determine an appropriate modality to expedite the Budhi Gandaki project touted as the solution to the country’s perennial power crisis. “We will soon come up with a modality to develop the project,” said Dinesh Kumar Ghimire, joint secretary at the MoEWRI. “Currently, the project office is engaged in distributing compensation to private landowners whose lands have been acquired to build the project.” 

The government has allocated Rs18 billion for compensation payments and operational expenses for this fiscal year. The national pride project is expected to affect more than 8,000 households in Dhading and Gorkha districts, and it will be spending around Rs45 billion to acquire 58,000 ropanis of land.

The reservoir of the storage project will submerge 3,560 houses and partially affect 4,557 households. The government has decided to provide compensation ranging from Rs524,000 to Rs835,000 for each ropani of land that locals have to let go for the project. Around Rs15 billion has been distributed as compensation as of date.

For the last two fiscal years, the government has been collecting money through Nepal Oil Corporation (NOC) to develop the project.

The corporation has been imposing a Rs5 infrastructure tax for each litre of diesel, petrol and aviation turbine fuel sold.

Key facts

The 1,200 MW Budhi Gandaki Hydroelectric Project is the largest hydel project in Nepal with a completed DPR.

The reservoir-type scheme lies in Gorkha and Dhading districts, and has been included in the list of national pride projects.

The Pushpa Kamal Dahal administration decided to award the construction contract to CGGC on May 23, 2017.

The Sher Bahadur Deuba administration terminated the agreement with CGGC on November 13, 2017, saying there were some procedural flaws while awarding the contract.

The government said on November 24, 2017, that it would build the project on its own.

A Cabinet meeting held on February 9, 2018, decided to provide Rs94 billion in VGF for the development of the storage project.

Launching a white paper on the energy sector on May 8, 2018, the MoEWRI said the construction of the project would start within this fiscal year.