PM Oli seeks way out of West Seti conundrum

Kathmandu, July 17

The 31st board meeting of Investment Board Nepal (IBN) led by Prime Minister KP Sharma Oli has directed the office of IBN, Ministry of Finance and Ministry of Energy, Water Resources and Irrigation to take a final decision about handing over the construction of West Seti project to the Chinese company.

Price dispute related to electricity to be generated by the 750-megawatt reservoir project has stalled the mega project that was supposed to be constructed by China Three Gorges Corporation (CTGC). In today’s IBN meeting, PM Oli directed all concerned authorities, including Nepal Electricity Authority (NEA), to hold discussions with the Chinese firm and conclude whether or not to pursue with the initial plan to allow CTGC to build the project.

“In case they are unable to come up with a logical solution to the dispute within two months, the earlier pact with the Chinese firm will be scrapped,” said Uttam Bhakta Wagle, spokesperson for IBN.

Last year, NEA and CTGC had agreed to establish a joint venture company with 25 per cent NEA’s stake to develop the project. Back then, the representatives of CTGC had expressed concerns related to bankability of the project based on current tariff policy of NEA.

Earlier, NEA had fixed rates of Rs 12.4 and Rs 7.10 per unit for reservoir projects in dry season and wet season, respectively. As per NEA’s requirement, the project must generate 35 per cent of total installed capacity in the dry season. During the wet season, NEA slashes tariff by a similar per cent if the project generates seasonal energy of above 50 per cent. For example, if a project generates 65 per cent of rated capacity, per unit tariff will be reduced by 15 per cent to Rs 6.035 for energy exceeding 50 per cent of the installed capacity.

Interestingly, the government had appropriated funds in the national budget on May 29 to build West Seti utilising local resources, effectively cancelling the earlier agreement with CTGC. Prior to that, the government had cited frustration over the Chinese company’s dilly-dallying in building the project.

However, the government is reconsidering the earlier decision following intense pressure from the northern neighbour during PM Oli’s recent visit to China, according to sources.

Meanwhile, the meeting today also decided to approve foreign investment of $200 million from Dolma Fund Management for a solar project.

The meeting also approved the project development agreement with NepWaste Company Pvt Ltd for waste management of Kathmandu Metropolitan City, Dakshinkali, Chandragiri, Nagarjun, Tarakeshwor, Tokha, Budhanilkantha, Gokarneshwor, Kageshwori-Manahara and Shankarapur municipalities.

The meeting has also formed a committee to amend the existing Investment Board Act.