Nepal revives power plant deal with China

Nepal revives power plant deal with China


Nepal has revived a deal with a Chinese firm to construct a 2.5 billion dollar hydroelectric plant, that the previous government had scrapped, officials said. The Prime Minister, K P Oli’s government last week decided to hand over the Budhi Gandaki Hydropower Project, to China's Gezhouba Group Corporation (CGGC), reversing the former Sher Bahadur Deuba government’s decision to develop the 1200 MW project with internal resources.

A Nepal Cabinet meeting has directed the Energy Ministry to initiate the process to award the project to the Chinese developer. According to decision, the ministry has been asked to hold talks with the Gezhouba, prepare a proposal, and strike a deal to execute the reservoir project.

Following this decision, the Energy Ministry will now invite the Chinese company for talks and prepare a draft of the memorandum of understanding (MoU) before signing it, according to multiple sources. 'The understanding will be signed to execute the project under the engineering, procurement, construction and financing (EPCF) model,' said one senior official.

This is not the first time that the government has roped in the Chinese to develop the Budhi Gandaki project. The Pushpa Kamal Dahal-led government had, in May 2017, also signed an MoU with the CGGC to execute the project under the EPCF model.

The agreement invited controversy as the project was handed to the Chinese company without initiating any competitive bidding process. However, the Deuba administration scrapped the deal in November citing irregularities. After cancelling it, the then government had plans to build the project using domestic financial resources via the state-owned Nepal Electricity Authority. A committee was later formed to explore financing options to build the plant.

The committee had suggested that the government develop the project on its own by providing viability gap funding, covering one-third of the project’s development cost. The Cabinet during the Deuba administration approved the committee report and agreed to provide the gap funding.

But the plan never took off as the government changed before the decision could be implemented. The new Oli administration,which had publicly criticised Deuba’s decision, disowned the previous administration’s decision. Landlocked Nepal suffers from massive energy shortages and is compelled to buy power from India.

Experts have criticised the Oli government’s decision to develop the project without competitive bidding, saying such a move might make the project expensive. Touted as the key project to resolve the country's perennial power crisis, the Budhi Gandaki project, would affect more than 8,000 households. The reservoir for the storage project will submerge 3,560 households, which will have to be resettled in an alternate location with due compensation. As many as 4,557 houses will be partially affected.