The mega project which envisages ensuring energy security for Nepal for the next decades has been in limbo due to uncertainty over the modality of its development.
The project will be Nepal’s largest reservoir-type hydropower project and its development has been estimated at $2.6bn. The project area is situated at the boundary between the districts of Gorkha and Dhading. For the government, generating resources and closing the project's budget gap will be a difficult undertaking. Of late, the government has been mulling to hand over the development of the Budhigandaki Hydropower Project to the Nepal Electricity Authority (NEA). In April this year, a task force was formed to finalize the share structure of Budhi Gandaki Jalbidhyut Public Limited. The task force led by NEA Deputy Executive Director Pradeep Kumar Thike was assigned to revise the share structure of Budhi Gandaki Jalbidhyut Public Limited to give a majority stake in the company to the government-owned power utility. Later in May, the NEA board decided to give the responsibility of the CEO of Budhi Gandaki Jalbidhyut Public Limited to Thike. The government in the last fiscal year decided to build the reservoir-type project on its own and established Budhi Gandaki Jalbidhyut Public Limited for the development of the 12,00MW project. As of now, the authorized capital of Budhi Gandaki company is Rs 20bn. The Energy Ministry has a 50 percent stake in the company while the Finance Ministry and NEA have 30 percent and 20 percent stakes, respectively. According to NEA, it has the technical expertise on developing big projects but it wants a majority stake in the newly established company. As developing storage-type projects is quite expensive compared to the run of the river-type projects, a viability gap funding is likely to be required from the government to develop this project, according to NEA. The project which has been touted as important to ensuring Nepal's energy security as it is expected to help the country to be self-reliant even during the dry season has been in limbo for a long time due to uncertainty over the modality of its development. Earlier, Budhigandaki fell victim to policy inconsistency despite facing hardly any problem in land acquisition and completion of DPR. In 2017, the then government, also led by Dahal, awarded a contract to build the project without competitive bidding to China Gezhouba Group Corporation under the engineering, procurement, construction, and financing (EPCF) modality. The Sher Bahadur Deuba-led administration in November 2017 overturned the earlier government’s decision. A high-level team led by Swarnim Wagle, former vice-chair of the National Planning Commission, was then established. The committee suggested that the project could also be developed using domestic resources. Again, in September 2018, the government led by KP Sharma Oli decided in favor of the Chinese company, reversing the decision of the Deuba-led government. In April of last year, the Deuba-led government once more decided to terminate the license granted to the Chinese company since it was not making any progress on the project. The report prepared by the committee headed by Wagle in 2017 suggested that the government should develop the project on its own by providing viability gap funding, covering around one-third of the project development cost. As per its report, the government could cover the cost of land acquisition and resettlement of displaced families which could total as high as Rs 94bn. A significant chunk of resources can be generated from government institutions. An infrastructure tax being imposed on imported fuel could be an important source of revenue that can be used to develop the project. According to the Wagle report, public enterprises such as Nepal Electricity Authority, Employees Provident Fund, Nepal Telecom, Rastriya Beema Sansthan, Hydroelectric Investment and Development Company, Upper Tamakoshi Hydropower Company, Chilime Hydropower Company, along with Nepal Army, Nepal Police, and the general public could be tapped for the project.
