Sunday, 1st March 2015

PDA for Upper Karnali in final phase

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The Investment Board Nepal and Grandhi Mallikarjuna Rao (GMR) construction company are to sign a Power Development Agreement (PDA) for the construction of the 900 MW Upper Karnali Hydropower Project, soon.

It is reported that all the preparations regarding the agreement are in the final phase.

"All the preparations for the PDA for the Upper Karnali Hydropower Project are in the final phase," said Radhesh Panta, Chief Executive Officer (CEO) at the Board.

Talking to some Economic Journalists amid a program in Kathmandu on Thursday, he said a majority of issues have been finalized with the project developers to sign the PDA as soon as possible.

Talks were held with the Arun III and Upper Karnali power developers on Wednesday and it would continue today as well, Panta said while informing that both sides have reached the final phase for the PDA.

Panta reiterated that both of the projects were very important for the development of the entire country and the Board was committed to work in the national interest.

Locals of Surkhet, Achham, and Dailekh, the districts of the project affected area, were positive for the construction of the Upper Karnali and expressed his hope that there would be no disturbances regarding the construction in the local level.  "We had gone to the power construction site few days ago, people are excited and they expressed their commitment to extend support in constructing the Upper Karnali," Panta said.

Tasks for the land acquisition, resettlement of people, and protecting the environment were rather challenging but the Board has been working by remaining in close contact with the bodies concerned and the local people to ensure conducive environment and make the project activities  transparent, Panta said.

The GMR was selected for the power development through a competitive bidding process in 2008 and the Upper Karnali has the target of exporting power produced from the project to the Indian market.

The Investment Board forwarded talks with the GMR for the PDA since 2013. Once the PDA was signed, the company would manage financial arrangement within two years and then the five-year construction period would begin. It will produce power within 2021. GMR would hand over the project to the government after 25 years.

The country would get 27 per cent free equity of the project and 12 per cent energy free of cost. Nepal would get 108 Megawatt power free of cost from the project which is 15 per cent of the total power capacity installed in the country.

Similarly, an estimated benefit equivalent to around Rs. 300 billion would be gained from tax, royalty, free power, and free equity. Of the total royalty, 50 per cent will go to the state coffer, 38 per cent will be spent in the affected area and 12 per cent will be given to the affected three districts, Surkhet, Achham, and Dailekh. The project would create job opportunities for the local residents and employ around 2,000 people during the peak construction time.

As many as 239 households of three VDCs each from Achham and Surkhet and six VDCs of Dailekh would have to be resettled for the project construction. Likewise as much as 48.85 hectares of private land and 207.75 hectares of public land needed to be acquired while 75.93 kilometer-long transmission line should be constructed.

The project of around Rs. 139.5 billion would contribute to the socio-economic transformation of the country and is expected to support the government's target of upgrading the country into a developed country status by 2021.

The government announced attractive package to big power projects in the budget for the current Fiscal Year 2014/015 on Sunday.

In the context of the talks regarding the development of the Upper Karnali, Arun III (900 MW), Tamakoshi III (650 MW), and Marsyangdi II (600 MW) power projects reaching the final stages, the Board has been further encouraged for signing the PDA of the Upper Karnali.

The government has through the Budget announced to exempt income tax for the next 10 years and provide 50 per cent discount after that to big hydropower projects to attract foreign investors in this sector but they need to produce and supply power to the national transmission line within 2017/018.  

Similarly, the government announced a grant of Rs five million per megawatt to power producers once they were installed in the national transmission line and 10 per cent extra grant when they are installed within the next five years.