New Business Age

BUDHI GANGA Hydropower Project in Limbo

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BUDHI GANGA Hydropower Project in Limbo

The government handed over the Budhi Ganga Hydropower Project in 2012 to the Department of Electricity Development after a private developer failed to build the project. Nine years later, the 20 MW hydropower project’s fate is still uncertain. What went wrong?

Budhi Ganga Hydropower Project, located in Achham district on the Budhi Ganga River, was first identified as a peaking run-of-river hydroelectric project in 1996. Its feasibility study was completed in 1997. This project aimed to supply 20 MW of reliable power to the national grid. The power generated by the 20 MW project was set to be evacuated to the Lamki Substation, Kailali through a 96 km 132 kV transmission line.

The feasibility study estimated the total cost to be at USD 50.64 million with a three year construction time frame.

After completing the study, a private company was awarded the license initially.  However, the then Ministry of Energy provided the license to the Department of Electricity Development (DOED) in 2012 after the private developer failed to construct the project.

The government not only granted the license to the department but also arranged for the financial resources required to develop the project.

The government had roped in Kuwait Fund to finance USD 18 million and Saudi Development Fund to chip in USD 20 million. The government had pledged to bear the remaining cost of the project from its internal sources.

However, the DOED has not completed a detailed study of the project even after nearly a decade of getting the license from the government and completing financial closure.

The design of the project is yet to be finalised while it’s still awaiting the approval of the environmental impact assessment (EIA) report.

As the developer has not come up with a timeline for the project development and generation of electricity, its fate is still uncertain.

DOED has even faced questions as to why it took the initiative to develop hydropower projects when its responsibility is to issue permits and facilitate the private sector to build hydroelectric projects and transmission lines.

The government officials had argued that the execution of the project would help in utilising the employees of DOED and enhance their capacity.

While the idea itself was not bad, experts have called for some serious soul-searching to find out what went wrong. This could offer lessons to the government and other agencies working in the hydropower sector on what makes a project uncertain, what needs to be done to make sure that other projects do not meet a similar fate and what policy reforms in the hydropower sector are needed.

Why was DOED given the responsibility of building the hydroelectric project while the government-owned Nepal Electricity Authority has been doing similar work? This is the question that the government has not been able to answer yet. If the private sector has been successfully developing such projects, the government should look at something else.

The role of project execution undertaken by DOED, which regulates as well as facilitates private sector participation in the power sector, raises concerns about its intentions.  

Each government agency has its own responsibilities. There is no reason for all agencies to get involved in project execution. Some analysts in the market link the current unhealthy competition to undue benefit during the project implementation.

Lately, other government-owned companies like Employees Provident Fund and Nepal Telecom have also entered the fray to develop hydropower projects.

While DOED has been enforcing rules and regulations to other promoters and developers, it has failed to implement its own project for years. Private sector developers complain that the department has not been following the same rules and regulations that it has been enforcing on other promoters and developers.

If this delay came from a private sector developer, DOED would have already scrapped the license and handed it over to another player. Delay to start the project even years after the financial closure either demonstrates the government agency’s failure or an act of gross negligence.  

DOED’s inability to start implementation of the 20 MW project whose feasibility study has already been completed, also comes at a time when private and public companies are developing numerous big projects.  

It is unfortunate that the agency responsible for issuing licenses to other promoters to develop hydropower projects, to regulate them and create an environment to attract domestic and foreign investment in the power sector has become so incapable itself.

The long delay has also increased the cost of the project. Though there is no exact figure of cost escalation, project officials agree that the delay would have significantly raised project expenditure.

Ultimately, who should be made responsible for millions of rupees in losses due to the government’s delay in executing the hydropower project? Budhi Ganga looks like a technically viable project. A hydropower project in the Sudurpaschim province is also expected to help in achieving balanced development.

But, it’s naive to think that the current management will successfully build the project.

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