Nepal allows Indian firms to enter hydropower sector

By Sudeshna Sarkar, IANS

Kathmandu : After stalling for almost a year, Nepal’s government has finally cleared the decks for Indian companies to enter its hydropower sector although obstacles still remain.

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The council of ministers Sunday approved of foreign investment in two projects that were being eyed by major Indian companies.

According to minister of state for water resources Gyanendra Bahadur Karki, the cabinet has approved foreign investment for the 402-MW Arun-III and 300-MW Upper Karnali projects.

After Nepal started seeking investment from abroad to develop the two projects, nine companies had bid for Arun-III and 14 for Upper Karnali, most of them Indian firms.

A committee formed by the government to evaluate the bids declared the Hyderabad-based GMR company to be the best bidder, taking into account its experience, financial status, royalty and free energy offer.

For Upper Karnali, followed by GMR, the other Indian companies ranked as the best bidders were KSK Engineering, also from Hyderabad, Reliance and Jindal.

For Arun-III, the three other top contenders were Sutlej, Jindal and Reliance.

However, GMR’s bids received a blow when the parliamentary committee for natural resources and means overturned the recommendations, saying that one bidder should be given only one project at a time.

The MPs also asked the government to award the contracts after taking into consideration factors like the offer of free energy and royalty.

Of the four, Jindal has offered the maximum free energy to power-starved Nepal – 12 percent for Upper Karnali and 22 percent from Arun-III.

Now fresh negotiations will be started among the top bidders.

With the Maoists returning to the government Monday, the actual awarding of the contracts is likely to take even longer.

The rebels have begun a fresh campaign against Indian authorities and are likely to insist on their pound of flesh for letting work start on the two projects.

Also, with Nepal this month declaring itself a federal republic, the regions in which the two projects are located would also want to enter the bargaining table.

To make things even more complicated, the government has agreed to form a coordination committee comprising a member each from all the ruling parties.

The new committee will have the power to decide contentious issues, which include water resources.

India has been trying to push the deals through. The Indian ambassador to Nepal Shiv Shankar Mukherjee recently said that Nepal’s hydropower sector was the factor that could kick-start the economy.

However, if the Maoists continue their anti-Indian stand, the push would produce negative results.