KATHMANDU, Jan 25 - After five successive days of negotiations, the government decided late Thursday to award the 300 MW Upper Karnali project to India's GMR Energy Ltd.

The Ministry of Water Resources (MoWR) signed a Memorandum of Understanding (MoU) with a GMR team led by its Senior Vice President Avinash Shah Thursday evening, according to Anup Kumar Upadhyay, joint secretary at MoWR.

The decision was taken after GMR agreed to increase its free energy offer to Nepal from 7.5 percent to 12 percent (36 MW), said Upadhyay, who participated in the negotiations.

However, GMR's free equity offer has been dropped from 33 percent to 27 percent to compensate for the increase in the free energy component. GMR will also pay export tax and royalties to Nepal according to existing legal provisions, said Upadhyay.

"We signed an MoU incorporating these agreements," said Upadhyaya, who is a member of the team formed by the cabinet on December 30 to renegotiate the Upper Karnali and 402 MW Arun III projects with prospective developers.

The cabinet had directed the team to renegotiate the projects, with free energy as the highest priority for Nepal. The cabinet set 12 percent free energy from the Upper Karnali and 21.9 percent (88 MW) free energy from the 402 MW Arun III as base benefits for Nepal.

The cabinet had also directed the team to start negotiations with developers in the order of the ranking prepared last year by a taskforce led by former secretary Bhanu Prasad Acharya.

GMR was ranked as the company with the best proposals for both projects from among the 14 companies interested in Upper Karnali and nine companies interest in Arun III. Since GMR is getting the Upper Karnali, the team will now negotiate Arun III with the second ranked developer, India's Sutlej Jal Vidhyut Nigam. The cabinet had also directed the team to award only one project to one developer.

"We have invited Sutlej for negotiations on February 3," Upadhyay said.

GMR will have to pay the government Rs 100,000 per MW for project survey, and Rs 500,000 per MW in bank deposit before starting project construction.

Upper Karnali as well as Arun III are being developed to export power to India.

Though the Acharya taskforce had recommended that both projects be awarded to GMR, parliament's Natural Resources and Means Committee later directed the government to review the recommendation making free energy as the topmost priority. 

GMR has set a target of 2.5 years for preparatory work on the project, and 4.5 years for construction.

Last edited: 24-Jan-08 10:06 PM

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KATHMANDU, March 5 - Even as Nepal scrambles frantically for funds to develop power projects and ward off the grim prospect of up to 17 hours of power outage daily in a few years' time, there has been zero progress on the 240 MW Naumure project, which India is willing to build for free.

During a power summit in Kathmandu in September 2006, Indian Ambassador Shiv Shanker Mukherjee had promised that India would build a hydropower project of up to 100 MW size under grant assistance for Nepal. In October the same year, the Indian embassy wrote to the Ministry of Water Resources (M0WR) that it was willing to increase the size of the grant project to 250 MW.

Nepal Electricity Authority (NEA) chose a storage project - the 240 MW Naumure on the West Rapti. According to an Indian embassy official, the first joint field visit and discussions were conducted in January 2007, after which "it was agreed that the Nepali side would determine the project scope and prepare the terms of reference [ToR] for undertaking field investigation and other studies."

So far, the Indian embassy has not received anything from the Nepalese side in this regard.

Since mid-2007, MoWR has thrice forwarded proposals to the Ministry of Finance to send a formal request to the Indian government to commence work on the project. The third proposal is still at the Finance Ministry.

"We sent the last proposal to the Ministry of Finance three weeks ago," said Anup Kumar Upadhyay, MoWR joint-secretary.

"We are sending the proposal back to the Ministry of Water Resources soon," said Bhuwan Karki, under-secretary at the Finance Ministry who looks after hydropower and roads. 

Why the ding-dong and why is it taking so long for the request to reach the Indian government? Is it sheer incompetence or a complete lack of drive that is stalling the project?

According to Upadhyay, after Naumure was chosen, it turned out the Department of Irrigation had once conducted a survey to develop it into an irrigation project, while Nepal Electricity Authority (NEA) did its survey to develop it into a hydropower project.

"It took time for us to reconcile the irrigation and hydropower components," Upadhyay said. "We concluded that apart from the two components, a new study on the multipurpose project also needed to incorporate the building of a re-regulating dam at Bhalubang," he said. 

The Finance Ministry says it is sending the Naumure proposal back to MoWR as it also includes the building of cross border transmission links, whose modalities have not been clearly outlined in the proposal.

"Were it only a proposal for forwarding a request to the Indian government for building Naumure, the ministry would have already forwarded the request," said Karki. "But the border transmission component has complicated things."

However, according to Upadhyay, this shouldn't be a problem. "The proposal for Naumure and for the transmission links are two separate proposals," he said.

As things stand, it is still too early to ask when work on the project, that India is gifting Nepal, will actually commence?

The Naumure project site on the West Rapti River is at the boundary between Dang and Pyuthan districts. In addition to augmenting power availability during dry season, the storage project can provide irrigation benefits to dry areas in Kapilvastu and Banke districts.

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