Company cannot start work on Budhi Gandaki water project

Budhi Gandaki Jalbidhyut Public Limited, formed in early September to develop the 1200 MW Budhi Gandaki hydropower project, is awaiting approval from the Office of the Company Registrar to begin work on the project.

The project, to be built in Gorkha and Dhading districts, will be the largest dam power plant in Nepal and will cost $2.6 billion. Construction is expected to take eight years.

However, the company hasn’t yet been able to begin work because it’s not received approval from the Office of the Company Registrar, according to Sunil Poudel, permanent secretary at the Ministry of Energy, Water Resources and Irrigation. “The Company Registrar’s Office hasn’t granted permission to start the work because we’ve not been able to show the required cash balance,” he said.

According to Section 63 of the Companies Act 2007, no public company established under the Act can commence operations without obtaining authorization to carry out its activities.

Poudel, who’s also a board member of the newly formed company, said they’ve applied to the Ministry of Finance for a guarantee of about 10 million rupees to obtain permission to start operations.

“We’ve not received that commitment yet. This could be because the Ministry of Finance is still undecided given the election code,” Poudel said. “The board will make plans on how we can move the project forward, including financial close.”

Budhi Gandaki is a finished project, as the detailed project report (DPR) has already been prepared and the distribution of compensation for the acquired land and houses is also nearing completion.

“The biggest challenge now is to raise the necessary funds for the development of the largest project in the country,” Poudel added.

A committee headed by Swarnim Wagle, then vice chairman of the National Planning Commission, had proposed that the government develop the project itself by covering one-third of the cost of development.

In its report, the committee said the government could cover the cost of land acquisition and resettlement of displaced families, which could amount to as much as 94 billion rupees.

According to the report, a significant portion of the funds can be raised through self-financing by government institutions. An infrastructure tax levied on imported fuel could be an important source of revenue that can be used to develop the project, the report said.

“Up to 164 billion rupees could be collected by fiscal year 2026-27 if petroleum consumption increases by 10 percent per year,” the report said. However, the estimated tax revenue is based on the infrastructure/carbon tax of 5 rupees per liter, which the government has been collecting since 2015.

In May 2015, the government decided to collect a tax of 5 rupees per liter of petroleum products (except cooking gas) from consumers to develop the Budhi Gandaki project. According to the Nepal Oil Corporation, more than 22 billion rupees in revenue has been collected under the heading of the Budhi Gandaki Project

In fiscal year 2018-19, then Finance Minister Yuba Raj Khatiwada changed the name of the heading to “Infrastructure Development Tax” In addition, the tax was increased to 10 rupees per liter of petroleum products.

Nearly 100 billion rupees were collected through the infrastructure development tax, Nepal Oil Corporation officials told The Post in early September. The oil monopoly had also asked the government to give it a percentage stake in the project if the tax on petroleum products was maintained.

In addition to the infrastructure tax, government agencies such as Nepal Electricity Authority, Employees Provident Fund, Nepal Telecom, Rastriya Beema Sansthan, Hydroelectric Investment and Development Company, Upper Tamakoshi Hydropower Company, Chilime Hydropower Company, Nepal Army, Nepal Police and the general public could also be involved in the project, the report said.

Resources may also be raised from international donor agencies or through the issuance of project-specific bonds and loans from the project’s suppliers, the report said.

“Before exploring these options, the organization should make the necessary board decisions and appoint the executive director and other staff,” Poudel said.

However, the government has already decided that it’ll cover the cost of land acquisition. According to Jagat Kumar Shrestha, coordinator of the project’s Environment, Compensation Distribution, Resettlement and Rehabilitation Department, the government has already spent about 41 billion rupees on the project.

According to him, compensation of around 35 billion rupees has already been paid for 48,900 rupees of land acquired for the project, while additional compensation has been paid for houses, stables and crops affected by the project.