Incessant Government’s Policies and Program: Budhi Gandaki Hydropower project

-Nilima Maharjan

Ms. Maharjan ​​is a research fellow at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. Author can be reached at Nilima Maharjan [email protected].

President Ram Chandra Paudel, continuing the Parliamentary legacy, presented the government policies and programs in the joint session of the Federal Parliament on May 14. Amongst, the presented policies and programs was the Budhi Gandaki Hydropower project, which the government avowed to build soon. The study of the project was expected to swamp 2400 hectares of forest, 3.5 million trees, and 15 protected species, and was acclaimed that the government will resettle locals. Former Water Resources Minister Dipak Gyawali criticized the project for failing to address irrigation aspects and the type of dam. At the same time, Laxmi Devkota, Former Chair of the Budhi Gandaki Development Committee claimed the dam has earthquake resistance and international safety standards.

The government began levying a Rs. 5 tax per liter on petroleum products, including petrol, diesel, and aviation fuel in the 2015-16 fiscal year. The then-finance minister reported having sourced funds for the Budhi Gandaki Hydropower Project. But later in February 2020, the tax was increased to Rs.10 for each supplied liter; however, officials from the Ministry of Finance said no funds collected under the infrastructure tax category were assigned to any specific project. According to a report submitted to the government by the Nepal Oil Corporation, it has contributed around Rs194.5 billion towards infrastructure tax till March 29, 2023. The transparency of how this infrastructure tax is distributed and used is dubious. If the funds needed to finish the Budhi Gandaki project can be obtained from this tax in a few years, it is important to question why does the government utilize the funds for other projects?

‘Budhi Gandaki Jalbidhyut Public Limited’, the Government being the largest shareholder, has registered that no progress has been achieved so far. The company is registered but the completed structure is not clearly defined with the roles and responsibilities of the human resources and secure financing. Till date,194.5 billion dollars collected, under the pretext of infrastructure tax. But there is no progress and no clear reasons are provided for the abeyance. Similarly, the Budhi Gandaki Hydropower Project was recently discussed, and the committee working under the Ministry of Energy, Water Resources, and Irrigation has proposed three investment modalities. The committee recommended a 80:20 loan-to-equity ratio for an estimated total investment of Rs. 306.16 billion, including the interest amount banks claim during construction. Secondly, the committee recommended a total estimated investment of Rs. 303.77 billion with an equity ratio of 75:25. And the third modality proposed, the expected total cost of Rs.301.22 billion with a loan-to-equity ratio of 70:30. Following the evaluation of the investments, risk, and return, the committee then recommended the government the initial options of 80:20 loan to equity. However, there has been no update on the project since this recommendation. The government must soon seek the best option from the alternatives, such as a public-private partnership or transfer to the private sector if anybody is still interested, given this project has several shortcomings like huge investment, policy inconsistency, and Nepal Government Commitments.

Though there are challenges, this project can be a savior as it will help to cease importing power from India during the dry seasons and shortages. The peaking run-of-river technology ensures that the plant produces power that is priced optimally during the peak periods and Nepal can generate and export power to operate at a capacity of 1200 MW and achieve energy self-sufficiency from power for profit, so this project is crucial.