December 26:  The government has signalled it will terminate the agreement with Chinese company Gezhouba Group which was awarded the contract to construct the 1200 MW Budhigandaki Hydropower Project. However, the government does not have any backup plan on how to proceed further after terminating the contract with the company.

In a press conference, Pampha Bhusal, Minister for Energy, Water Resources and Irrigation said Gezhouba has been given a deadline to complete the project. She said the government can't afford to wait any longer for the completion of the project. The government seems to have adopted a strategy of terminating the contract with Gezhouba. 

A senior official of the ministry said there was no plan on how to move forward in case the contract is terminated with the Chinese company. He said that the ministry is forming a special committee to study on how to move the project forward. A decision will be taken after a committee submits its report. The decision has to be made without affecting the bilateral relations with the two countries. 

The government has already made up a plan to build the project with domestic investment. The Chinese company was handed over the contract when Pushpa Kamal Dahal, chairman of the Maoist Centre, was leading the government. Later, PM Deuba-led government scrapped the agreement but the project was again handed over to the Chinese company by former PM KP Sharma Oli. 

 The government had planned to build the project in the Engineering, Procurement, Construction and Financing (EPCF) model. In this regard, several discussions were held between the Ministry and the Chinese company.  However, that discussion has not reached any conclusions. 

None of the existing laws allow the construction of hydropower projects in the EPCF model. During the discussion, officials had said the agreement can't be signed in this model and sought for further study on how to build the project. 

Meanwhile the government is said to be fully prepared to move ahead with the construction of the project. It has completed all the tasks including DPR, environmental impact assessment report approval and compensation distribution. In that case, the government can't wait for the Chinese company any longer, said officials of the ministry.

According to the EPCF model, the technical and financial aspects of the project are the responsibility of the company. The company should build the project with its own investment. After the construction, the government has to pay back to the company for its investment including for a certain period of time. However, the government has not yet reached an agreement with the company on construction modalities and investment. In a meeting held in December 2018, both sides had agreed to bring a proper proposal. Despite repeated discussions, none of the governments of Nepal have been able to reach an agreement with the company.

The construction of Budhigandaki project is being looked upon with huge significance. The cost of the project is estimated to be around Rs 300 billion. The government has been collecting tax of Rs 5 per liter on petrol, diesel, kerosene and aviation fuel for this purpose since 2015/16.