India's GMR Group bags Nepal hydropower project | business | Hindustan Times
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India's GMR Group bags Nepal hydropower project

This paves the way for more Indian firms to enter one of the most lucrative sectors in the Himalayan nation.

business Updated: Jan 25, 2008 16:00 IST

Indian infrastructure projects major GMR Group has been awarded a major hydropower project in Nepal after several political obstacles, paving the way for more Indian firms to enter one of the most lucrative sectors in the Himalayan nation.

The Bangalore-based GMR Energy has signed a pact with Nepal's ministry of water resources to develop the 309 MW Upper Karnali hydropower project in one of the most inaccessible and underdeveloped regions of Nepal, officials said.

GMR's senior vice-president Avinash Shah signed the deal that will give power-starved Nepal 12 per cent free energy, amounting to about 36 MW.

Despite the Maoists earlier asking the government not to sign any major deal before the April election and a French company threatening to move court, saying it had been granted an earlier licence, GMR has beaten 13 contenders.

The mega power projects signed between the governments of India and Nepal are yet to get off the ground due to political hostility.

When GMR had first bid for the project, it had offered 7.5 per cent free energy to Nepal and 33 per cent free equity, officials said. Its competitors included Reliance Energy and the Jindal Group.

After the Nepal government formed a committee headed by former finance secretary Bhanu Prasad Acharya to assess the bids, GMR was declared the best bet for both Upper Karnali and the 402 MW Arun-III projects.

Yet, a cabinet committee decided that bids would be re-evaluated on the basis of who offered the highest amount of free energy, even though Nepal underwent six hours of power outages daily and faced a 11-hour daily outage in dry months.

After five days of negotiations, GMR agreed to increase its free energy offer and will give Nepal 27 per cent free equity, officials said.

The ministry said it would now begin negotiations for Arun-III. But GMR will not get another project since a parliamentary committee has directed the government not to award more than one project to a company at a time.

The directive is expected to be a blessing for the second contender for Arun-III project - India's Sutlej Jal Vidyut Nigam, which will begin negotiations with the concerned ministry. Talks are to start in the first week of February.

GMR is reportedly targeting to wrap up the initial spadework for the project in two-and-a-half years while construction would take four to five years. Before that, it will have to pay the government around $7,900 per MW as bank guarantee and a fifth of that per MW for project survey.

The breaking of the ice in Nepal's hydropower sector is an outcome of a push by the Indian government and Nepal's finance ministry, officials said. India's outgoing ambassador to Nepal Shiv Shankar Mukherje had said last year that hydropower had the ability to kick-start Nepal's floundering economy.