Breakthrough or anit-national?

There are no export oriented projects in operation as of now. But the PDA with GMR (an Indian company developing 900 MW Upper Karnali project) is suddenly in the limelight. Some experts are claiming to be an anti-national deal while others calling a breakthrough.

Breakthrough

Investment Board of Nepal (IBN) claims that it has managed to set an example by doing PDA with GMR. IBN has claimed that it serves Nepali interest as Nepal will get 12 percent free electricity and 27 percent free equity. Further, it claims that the project will come under government basket after 25 years of operation.

Anti-national

Those who were against the PDA claimed to be an anti-national agreement. Their arguments are.

a)  The full potential has been killed. The full capacity of Upper Karnali is 4,180 MW if a storage project is constructed. Storage project does have its own benefits. GMR is going to construct a simple RoR project.

b) Upper Karnali, with a design flow of 236 cubic meters per second and a mere 2.2 km headrace tunnel to obtain a head of 141 meters, is termed as “the jewel in the crown” by the Canadian consultant. Hydrocrats claims that Nepal should construct the project since per unit cost is one of the lowest in the world.

c) GMR is entitled to claim NPR 5 million per MW from the government. In addition, it is entitled to get 100 percent corporate tax exemption for the first ten years of operation and 50% tax has been waived off for the next five years. 

Government of Nepal announced NPR 5 million per MW and introduced tax holiday to encourage developers. The main idea behind such subsidy and tax holiday is to solve the energy crisis in Nepal. Since Upper Karnali is an export-oriented project, such incentives should be granted, according to the experts.

d) Further, GMR is entitled to get 50% discount on custom tax of cement, iron and steel product. This facility is not even provided to hydropower projects for internal demand.

e) GMR can select contractors without a competitive bidding.

Sometimes we become extremely emotional when it comes to the usage of our rivers. But in reality, emotional sentiments do not work in business. No investors will invest unless they are convinced that they will get a good return. This is a fact.

At the same time, signing a cheap deal for the sake of foreign investment is also not a good idea. However, I am not in a position to make any comment since I do not have the project details.

In an interview, Radhesh Pant, CEO of IBN, said that “Nepal will earn NPR 800 billion over a period of 25 years from two PDAs with Indian companies”. The next one is Sutlaj Jal Vidyut Nigam developing 900 MW Arun III. I hope he has done the calculation considering the time value of money.