Nepal charges infrastructure tax on fuel sale to collect funds for the project. (Representational Photo)
Nepal has signed a deal with a Chinese company to develop a 1,200 megawatt hydroelectric project. Nepal's Ministry of Energy yesterday signed a memorandum of understanding with China Gezhouba Group Corporation for the development of the 1,200-MW Budhigandaki Hydroelectric Project.
The agreement was signed at the prime minister's residence, in the presence of outgoing Nepal Prime Minister Pushpa Kamal Dahal "Prachanda" and Chinese Ambassador to Nepal Yu Hong, The Kathmandu Post reported.
As per the agreement, the storage project would be built under engineering, procurement, construction and finance model. Under this model, CGGC will help arrange funds to develop the project. The funds will be mobilised in the form of soft loan or commercial loan from Chinese financial institutions on terms and conditions acceptable to the Nepal government.
CGGC will also undertake the overall responsibility of executing the project. The Chinese developer, according to the MoU, will conduct additional studies and investigations on the project if required.
The MoU has given one year to the Chinese developer to conduct assessment of the hydropower project and arrange funds. This understanding, according to energy ministry officials, will not bind the government legally or financially to hand over the project to the Chinese company for construction, as the final agreement is yet to be signed.
The government has allocated Rs 5.33 billion for the project's development in the current fiscal. The EPCF model of project development, under which the contracting firm makes all the arrangements including mobilisation of financial resources to build the project, is considered to be one of the most effective and efficient models for development of huge infrastructure projects.
CGGC is currently building 30-MW Chameliya Hydropower Project in the far west and 60-MW Upper Trishuli 3A Hydropower Project in the central region.
The Budhigandaki Project has been touted as a key project to resolve the perennial power crisis in Nepal. The government has been raising infrastructure tax of Rs 5 from sales of every litre of petrol, diesel and aviation fuel to collect funds for the project.