Nepal cancelled deal with Chinese company to develop Hydroelectric plant

Vastavam web: Nepal has cancelled a major deal with a state-owned Chinese company to develop a 1,200 MW hydroelectric plant, the biggest hydropower project in the landlocked country facing acute energy crisis.The agreement for the USD 2.5 billion Budhi Gandaki Hydroelectric Project, which could have nearly doubled Nepal’s current hydropower production, was signed in June.Thapa said the agreement was signed “illegally and haphazardly”, the Kathmandu Post reported.
The government will soon announce the policy, work plan and procedure for constructing such a project having national priority, he said.Nepal’s Ministry of Energy had on June 4 signed the memorandum of understanding (MoU) with China Gezhouba Group Corporation (CGGC) for the project located in Gorkha and Dhading districts.The MoU had given one year’s period to the Chinese developer to conduct assessment of the hydropower project on the Budhi Gandaki river and arrange necessary funds for its development.
The project was touted as a key project to resolve the perennial power crisis in the country.At the time of the signing the MoU, the Chinese company had agreed to arrange soft commercial loans from the country’s financial institutions for constructing the project under terms and conditions acceptable to the government of Nepal.It was learnt that the government had handed over the contract of the biggest reservoir project to the Chinese company without initiating a competitive bidding process.
The Nepal government has been raising infrastructure tax of Rs 5 from sales of every litre of petrol, diesel and aviation fuel to collect funds to build the project.Nepal’s hydropower potential has been estimated to be around 84,000 MW, of which 43,000 MW has been identified as economically viable. Currently, Nepal’s installed hydropower capacity is just 753 MW, according to the International Hydropower Association (IHA).