Indian investors eye Nepal’s hydropower sector
With the restoration of democracy in Nepal the interest of Indian investors in the hydropower sector here has grown significantly.
The two-day Power Summit 2006 in Kathmandu that kicked off on Thursday with participation of a number of big Indian investors reflects that they want to try their hand in power generation in Nepal. On the first day itself, the Indian investors pledged to invest in power plants with a production capacity of 150MW electricity.
The meeting is being organised after the Indian companies reportedly approached the Nepal Electricity Authority (NEA) seeking permission for investment in the hydropower production.
According to NEA officials, last month some five Indian companies including Reliance, Jaypee and GMR had floated proposals to build hydropower plants here. The government had already opened the hydropower sector for private investors.
The organisers of the Summit have said this will help channel the Indian investment as well as finding market for the electricity. Dr Sandip Shah, president of the Independent Power Producers’ Association of Nepal (IPPAN), said during a press conference in the capital Wednesday that efforts at the government level should be supplemented by the Indian and Nepali private sector to utilise the vast potential of hydropower in Nepal and to enter into a regional power trade regime.
The Nepal government has already given green signal for opening Upper Karnali Hydropower Project with 300MW capacity and Raghugat Hydropower Project with 27MW capacity for Indian investment. The Indian companies have also shown their interest in Tamakoshi, Arun and West Seti. The geographic position of these rivers makes transmission of power to India very conducive.
Indian interest is also fed by the increasing demand of power in their country. The power purchase from Nepal or Bhutan will be much cheaper for India than setting up plants within the country. Indian companies have turned to Nepal following the success of power production in Bhutan. By the end of this year, India will get more than 25,000 MW from Bhutan including Tala and Chukha projects.
NEA officials say they have proposed for joint investment in various projects but negotiations are still underway to finalise of the proposals.
During the India visit of King Gyanendra last year, India’s National Hydropower Corporation had shown interest in developing the Upper Karnali hydropower project worth 300MW. However, the royal government rejected the Indian proposal.
In the meantime, small power producers are not quite happy with the idea of opening investment in Nepal’s power sector for Indians. Chairman of the Small Hydropower Development Association Hari Bairagi Dahal, who is also the executive director of Gautam Buddha Hydropower, says the government has been discouraging native investment in hydropower sector.
“A number of Nepali investors have not been given license for construction of power plants. The NRNs have are also interested to invest in this sector. By While it has not responded well to the NRNs’ proposals, the government is giving undue importance to Indian investment,” he argued.
Importantly, the government has accepted the Indian proposals positively after the projects like Khimti, Bhotekoshi or middle Marshyangdi, having European or World Bank investment, proved to be overly costly. The cost of Marshyangdi hydel has doubled than it was planned.
Bairagi says there attempt is being made to sell power to India while the country is facing acute shortage of power. The NEA has already imposed weekly 2-hour load shedding all over the country and this is like increase up to 14 hours a day in winter. NEA says the share from the Indian invest plants would meet the Nepal’s demand.
Nepali private sector has also expressed its commitment for investment in hydropower. In the recently held hydropower mart, Nepali industrialists pledged to invest in power plants worth 45MW. But this is far less than the current demand of the country. According to IPPAN, the current demand is around 900 MW, which is growing at 7-9 percent annually.
Nepal has an approximately 40,000 MW of ‘economically feasible’ hydropower potential. However, the country has so far been able to generate only around 600 MW of hydropower.