Government Lacks Modality to Build Budhi Gandaki Hydro Project

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Government Lacks Modality to Build Budhi Gandaki Hydro Project

April 17: The government has decided to construct the Budhi Gandaki Hydropower Project with domestic investment after cancelling the contract with China Gejuwa Group Corporation (CGGC). However, the government does not have the plan and modality to build the 1,200 MW project with domestic investment.

Last year, the cabinet meeting had decided to take the Budhi Gandaki project from CGGC and build it with domestic investment. In this case, the government should have a separate plan and modality for how to build the project. However, no plan or modality has been formulated in this regard so far. It seems that the government has decided to take over the project from CGGC only for the sake of popularity.

Stakeholders say that this project has been politicized. Some years ago, when the Chairman of the Maoist Center, Pushpa Kamal Dahal, was the prime minister, it was decided to allow CGGC to build the project in the Engineering, Procurement, Construction, and Financing (EPCF) model.

Later, when Sher Bahadur Deuba became the prime minister in five years ago, the project was snatched from CGGC. After UML Chairman KP Sharma Oli became the prime minister, it was decided to allow CGGC to construct the project again. Now that Deuba is leading the government again, the project contract with CGGC has been terminated again.

Officials of the Ministry of Energy, Water Resources, and Irrigation said that it has been decided to build it with domestic investment but no modality has been decided on how to build it.

The government said that the decision was made because of legal complications in allowing the CGGC to build the project. The government has also accused the CGGC of delaying construction. Joint Secretary at the Ministry of Energy Chiranjeevi Chataut said that the modality of constructing the Budhi Gandaki project has not been prepared yet. "Currently, it has been decided to take the project away from CGGC and build it with domestic investment. The plan and modalities of how to build it have not been decided yet. We are studying it,” he said.

Budhi Gandaki is a big project. It was earlier estimated that it would cost around Rs 300 billion. It is currently being re-evaluated. This project is considered equally risky. 

“As it is a big project, the risk of investment is also high,” said Chataut.

The issue of how to raise investment is also challenging. There had been various attempts to raise investment in the past as well. However, they did not succeed.

The private sector also said that the project should be constructed soon. Nepal has been buying electricity at high prices from India in winter due to a lack of adequate reservoir projects.

A reservoir project is needed to end that situation. On top of that, Budhi Gandaki is technically ready to go into construction. Therefore, the private sector is of the view that the construction of this project should not be delayed.

Other reservoir projects identified in Nepal are in the phase of survey and study. The survey of some projects has not been done as well.

The work of the DPR of Budhigandaki, approval of the environmental impact assessment report, and distribution of compensation have been almost completed. Now all that is left is to go into construction.

The private sector is also ready to invest in it. Chairman of the Independent Power Producers Association of Nepal (IPPAN) Krishna Prasad Acharya said that the private sector is ready to invest in Budhi Gandaki in partnership with the government. However, he said that the government should guarantee a return on investment.

“The private sector is ready to invest in the project in collaboration with the government. But, the government should guarantee the return. Expenditure should not be increased as in other government projects,” he said, adding, “If the government does not include investment for the transmission line, compensation distribution, and road construction in the project cost, we are ready to invest.”

The issue of the construction of the Budhi Gandaki project is being looked at with utmost importance. Its construction is estimated to cost more than Rs 300 billion. The government had started levying a tax of Rs 5 per liter on petrol, diesel, kerosene, and aviation fuel from the fiscal year 2072/73 for the construction of Budhi Gandaki project with domestic investment. It had been collecting Rs 10 per liter since February 2010.


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