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IBN finalize Arun-III PDA with rider

KATHMANDU: The board of directors of the Investment Board Nepal has approved the final draft of the Project Development Agreement on 900-megawatt Arun-III hydroelectric project on condition that a few amendments be made to the pact.

The conditional endorsement was extended by the IBN’s board meeting chaired by Prime Minister Sushil Koirala this evening.

“The board has asked the IBN management to make minor corrections to the language used in the agreement. Once that is done, we will hold comprehensive discussion on the draft PDA with major political parties, including the Nepali Congress, the CPN-UML, the UCPN-Maoist, Madhesi parties and the RPP, on Sunday,” Ghanashyam Ojha, head of external affairs at the IBN, told The Himalayan Times. “We will then incorporate suggestions laid by political parties and forward the document to the Cabinet as early as Monday.”

If the document receives the backing of major political parties, it is expected to easily sail through the Cabinet, as most of the members of the Council of Ministers are representatives of one or the other major party.

Cabinet’s formal approval would finally clear the decks for the IBN and India’s state-owned Satluj Jal Vidyut Nigam, the developer of the Arun-3 project, to sign the final deal — most probably during the 18th SAARC Summit scheduled for November 26-27 in Kathmandu, when Indian Prime Minister Narendra Modi will be here.

The IBN and SJVN have been holding PDA negotiations for the last one-and-a-half years.

If the agreement is indeed signed during the SAARC Summit, Nepal’s hydro sector would witness signing of the second PDA on hydroelectric project since the sealing of 900MW Upper Karnali PDA with GMR Energy of India on September 19.

Like the Upper Karnali project, Arun-III is also an export-oriented project being built under 25-year BOOT (build-own-operate-transfer) model. This means the project, estimated to cost over Rs 100 billion, will have to be handed over to the government in a good condition after 25 years of commencing commercial operation.

The project, which aims to complete construction works within five years of signing the PDA, plans to sell 78.1 per cent of the electricity in India and extend 21.9 per cent power — 197.1 megawatts — free of cost to the government. The market value of the free electricity extended throughout 25-year concession period hovers around Rs 166 billion.

During this concession period, the project developer will also pay around Rs 160 billion in royalty.

“Overall, the government stands to gain Rs 362 billion from the project throughout the concession period,” the IBN has said.

In addition, the project developer has also agreed to extend shares worth Rs 1.6 billion or more to the locals, according to Ojha. “It will also assess the downstream and upstream impacts and resolve them at its own cost.

Moreover, the project developer has also agreed to build transmission lines to deliver 20 units of free electricity per month to each household in the affected area,” Ojha said.

A recently conducted survey had shown that Arun-III project would affect 203 households in six VDCs — Pawa Khola, Pathibhara, Makalu, Yafu, Num, Diding.

“Of these, around 40-50 households would probably need to be resettled and others would need to sell their land to the project developer,” an IBN official said, adding, “The project developer may have to fork out a large sum while acquiring some of the private land, where high value cash crops like cardamom and rudraksha are grown.”

As per estimates, the project developer needs to acquire around 82.13 hectares of private land and 98.19 hectares of land belonging to the government.

Published Date: Saturday, November 22nd, 2014 | 07:24 AM

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