A committee to suggest on Upper Karnali Hydroelectric project draft Project Development Agreement (PDA) might take some days to report to the Prime Minister as it is waiting for the recommendations from Finance Ministry.

The committee – led by National Planning Commission vice chair Dr Govind Raj Pokharel – is waiting for remonnendation from Finance Ministry before submitting its final report to the Prime Minister Sushil Koirala, informed a member of the committee.

The Finance Ministry has the sole authority on deciding on cash incentives of Rs 5 million for each megawatt generated for export, according to the budget for the current fiscal year 2014-15.

The committee has, however, already consulted other related ministries like Irrigation, Forest, and Environment Ministries.

The draft PDA of 900MW Upper Karnali Hydroelectric project hangs on the decision on incentives as it has drawn mixed reaction.

Some critics reasoned that export-oriented hydel projects like Upper Karnali, that will sell 88 per cent of the electricity generated to India need not be provided the cash incentive. They claim that the incentives should be used to encourage domestic investors. However, the differentiation between the domestic and foreign investors will not send a positive message across the world for foreign investors, others say. They claim that the government should also be considerate of income of Rs 5.51 billion that it will make through royalties from Upper Karnali project, Rs 3.10 billion through income taxes and Rs 2 million through other taxes per year.
The committee was formed after dispute over PDA with GMR Group of India – the developer of the Upper Karnali hydroelectric project – during Indian Premier Narendra Modi’s visit to Nepal on August 3-4.

The committee that includes chief secretary, central bank governor, secretaries of home, finance, energy, irrigation, forest, environment and land development ministries and chief executive of Investment Board Nepal, was supposed to submit the report yesterday.

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