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PDA study team divided over cash subsidy proposal


KATHMANDU: Members of a technical committee formed to advise the government on the Power Development Agreement (PDA) document for Upper Karnali Hydropower Project (900 MW) are divided over a proposal to provide subsidy of Rs 5 million for each megawatt of electricity generated instead of VAT subsidy to the developer.

The committee led by vice chairman of the National Planning Commission Gobinda Raj Pokharel is yet to forge consensus on subsidy and the probability of adverse impact on downstream irrigation projects downstream in Tarai. Some members have strongly opposed the idea of paying subsidy to the project, arguing that subsidy was only for local developers. “

“We are collecting opinions on PDA document from all concerned ministri”s,” Pokharel said, adding that the committee was awaiting suggestions from the finance ministry.

The committee, which comprises of secretaries of all concerned ministries, will submit its report to Prime Minister Sushil Koirala.

Highly-placed sources said the committee was likely to present suggestions on the subsidy issue by attaching the opinion of the finance ministry. Some, however, say the subsidy issue should be finalized by negotiating with the developer.

In the budget for fiscal year 2014/15, Finance Minister Ram Sharan Mahat announced in bulk subsidy in lieu of subsidy on VAT to all hydropower projects, including the export-oriented ones, that begin generation by 2021/22.

Upper Karnali is an export-oriented project. If the government ultimately decides to provide subsidy in bulk, GMR – the developer of the project – is entitled to receive Rs 4 billion if the project starts generation before 2021/22.

Some are against giving subsidy on VAT to foreign developers, saying that the policy was meant for encouraging domestic investors by providing assistance in the form of viability gap funding.

Likewise, the developer will also receive 100 percent income tax holiday for the first ten years and 50 percent discount in income tax for next five years if the project starts generation before 2021/22.

The government had formed the technical committee after studying a presentation on PDA document made by the Investment Board Nepal in the run up to Indian Prime Minister Narendra Modi´s Nepal visit. Concerned government agencies had started preparations on a war footing to sign PDA with GMR and sign Power Trade Agreement with India during Modi´s visit. But it couldn´t materialize.

Meanwhile, the technical committee has suggested institute a third-party independent body for studying impact on downstream irrigation projects. The body will be asked to suggest measures within six months to overcome the impacts.

Ministry of Irrigation had drawn the attention of the Investment Board Nepal and technical committee toward the issue, saying that the mega project will severely affect downstream irrigation projects as it will only run in peak hours during dry months.

Speaking at the meeting of Agriculture and Water Resource Committee of legislature-parliament a week ago, Irrigation Minister Narendra Saud had said the project would affect downstream irrigation projects like Ranijamara-Kularia Irrigation Project, Rajapur Irrigation Project and Surya Patuwa Irrigation Project during dry months as the water flow will be far lower than required 322 cumec (cubic meter per second).

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Information for Indian tourists travelling by land:- 72 hours (-) C-19 report, CCMC form and Antigen Test at entry point
Information for Indian tourists travelling by land:- 72 hours (-) C-19 report, CCMC form and Antigen Test at entry point
Information for Indian tourists travelling by land:- 72 hours (-) C-19 report, CCMC form and Antigen Test at entry point