Private
sector (domestic and foreign) has done a commendable job. It has been
generating hydro-electricity for twenty years. Now, it contributes about 35% of
the total hydro-electricity. The rest comes from the government that started
generation more than 100 years ago. Many major projects initiated by private
sector are underway.
Demand
The
key demands of private sector are as follows. Please view Details regarding fees, tenure, taxation policy, royalty, VAT and custom to better
understand the existing policies.
a) Extension of
license:- Demanding for a
longer tenure. (At least 40 years).
b) VAT exemption:- Although government of Nepal announced
a subsidy of NPR 5 million per MW as a part of VAT exemption, private sector is
demanding for full exemption.
c) Revision of
royalty:- The COD is to
be considered as the base year for capacity royalty calculation.
d) Increment in
PPA rates:- Private sector
is never satisfied with the PPA rates.
e) Dollar
denominated PPA:- If not possible
for the entire tenure, private (foreign) sector is seeking for dollar PPA, at
least for the debt repayment period.
f) Sovereign
guarantee:- Government's
guarantee is needed to ensure the timely payment if NEA defaults.
g) Strict
policies for those who obstruct construction:- Private sector
is demanding for a strict punishment policies to those people who try to
obstruct the construction and operation of the project.
Problem
faced by the private sector
a) Irresponsible
NEA:-
There are many instances where developers have suffered badly due to failure of
NEA to construct transmission line. Sanima Mai hydro project (22 MW) is the
recent victim. Similarly, Sipring Khola hydropower project (10 MW) in Dolakha
has not been able to come into full operation.
Click Unbundling of NEA is necessary to read a related article.
b) Lack of one
window policy:- Project above
500 MW is handled by Investment Board of Nepal (IBN) that serves as a one-window
office. Others have to go through multiple ministries and line agencies for
approvals. Bureaucracy delay and unnecessary torture are likely to be faced by
the developers. At times, "taking care of" seems to be the only
solution for avoiding hassle.
c) Lack of
coordination among the ministries:- Department of
Electricity Development Authority (DOED) is responsible for issuing survey
license. It does so on “first come first basis” without proper coordination
between DOED and NEA (NEA is the sole power purchaser in the country). As such
many project licenses are distributed without a provision for power evacuation.
DOED,
however, claims that it is the responsibility of the developer to study the
power evacuation possibilities before applying license.
d) Lengthy IEE
and EIA process:-
Human resource for IEE and EIA approval is lacking. After the submission of TOR
and Scope of Study, a lot of experts like botanist, environmentalist, and socialist
have to present their comments and recommendations. This process is time
consuming due to lack of professionals in these areas.
e) Hydropower
mafia:-
This term is widely used in Nepal. This refers to a group of people holding hydropower
license with intention to sell it to either domestic or foreign investors.
"Jhola ma khola", a Nepali phrase meaning "river in bag" is
a way of describing the situation.
f)
Militant labor:- If laborers
only ask for what is right and management do not try to exploit them, then
things can go on smoothly. But this is not the case. Unions play a major role
and sometimes they do not realize what to ask for.
The
recent case by the workers (contractors’) in Upper Tamakoshi can be taken as an
instance. Workers obstructed the construction work by demanding shares in the
project. According to SEBON's (Securities Board of Nepal), workers from
contractors are not entitled to get shares in the project. This is the height
of greediness and arrogance.
g) Local
problems:- Obstruction by local people during
construction and operation of the project is becoming is a challenge. The
majority of locals are demanding free shares. For example, the local pressure
made the Upper Bhotekoshi project to provide 6 percent free of cost shares to
the local people.
g) Political
problems:-
Besides political instability, our leaders do not have a positive mindset. Almost
all local and labor problems are fueled by our leaders. Politicians are playing
their dirty politics in the name of locals and labors.
h) Irrelevant
clause by Banks and Financial Institutions:- These
institutions lack technical professionals. As such there is no difference
between Vehicle loan and Hydro loan for them. The concept of non-recourse
finance is lacking. Personal Guarantee (PG) covering entire loan backed by the
developers' Net Worth is needed for loan approval.
Please
view Project financing in Nepal and FINANCIAL CLOSURE OF KABELI B-1 HYDROELECTRIC PROJECT (25 MW). to better understand the problem.
i) Conflict of
interest:-
Particularly, Employees provident Fund (EPF) has been criticized for asking shares
in the projects where they extend loan.
Criticism
of private sector
a)
Corruption in private sector has crossed all limits.
b)
Unethical practice is quite a common phenomenon.
Please
view Insane sweat equity by our private hydropower developers. and The darker side behind the IPOs and a neglected rule. detail analysis.
c)
Total project cost of foreign owned project is always on the higher side due to
their expensive foreign consultants.
Please
view a comparison Locally constructed projects vs. foreign/multilateral funded projects
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