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Eight Indian firms in fray for Nepal power projects

Indian companies like Reliance and Larsen and Toubro, are bidding to develop three major hydropower projects in Nepal.

india Updated: Dec 08, 2006 17:26 IST

Eight Indian companies, including Reliance and Larsen and Toubro, are bidding to develop three major hydropower projects in Nepal, and more are likely to join the fray in future.

Facing a power shortage due to a weak monsoon, Nepal's water resources ministry is trying to get three hydel projects off the ground as early as possible.

These are the 300 MW Upper Karnali in the north, the 402 MW Arun III in the mid-west and the 600 MW Budi Gandaki.

So far at least 10 developers from abroad have shown their interest in the projects. Of these, while one is from Singapore - SN Power - and one a joint venture with a Turkish partner-Nepal Energy, eight are major Indian players.

Besides National Hydroelectric Power Corp (NHPC), which had already shown interest in developing hydropower projects in Nepal but could not get off the ground due to the political turmoil, the others are GMR, Reliance, Sutlej Bidyut Jal Nigam, Jaypee, Larsen and Toubro in partnership with Everest Bank, a joint venture of Punjab National Bank, Avantika and KSK Energy Ventures from Hyderabad.

Most bidders are eyeing the Upper Karnali project that in the past was stalled due to the remoteness of the region and the Maoist insurgency.

The government of Nepal decided to extend the deadline for the submission of detailed proposals by 10 days from December 14.

However, some potential developers, especially from India, are unhappy at Nepal's decision to enter into negotiations only with the companies that evinced an interest by October 28.

They feel that since there had been no major public announcements before, the cutoff date is arbitrary and could be at the interest of some of the firms already in the fray.

Though the department of electricity development says the over 1,300 MW generated from the three projects would be mainly exported, there is also the possibility of striking an understanding with India to supply power during India's peak hours and get power from southern Nepal during Nepal's lean periods.

The government was forced to enforce a weekly powercut of two-and-a-half hours from this month due to the deepening deficit. Though Kathmandu had asked New Delhi for power and had received an assurance for over 50 MW, according to Indian ambassador to Nepal Shiv Shankar Mukherjee, the transaction would be effective only after India has upgraded three major transmission lines.

Nepal has the hydropower potential to transform it from one of the poorest countries in the world to one of the most developed, but it has not been able to tap its resources due to lack of funds, the insurgency and the political instability.

While India is the most practical partner for developing and selling power, Nepal has so far been unable to develop any relationship due to the anti-Indian sentiment that regarded New Delhi as trying to gain undue advantages from hydel projects.

When Prime Minister Girija Prasad Koirala visited New Delhi earlier this year, making his southern neighbour his first port of call after assuming office, both the Maoists and major political parties issued public warnings to the premier not to sign any hydropower deals during his visit.

However, Nepal's private sector is now making an effort to bring in investors from abroad. The Independent Power Producers' Association of Nepal broke the ice this year by holding a meet between developers, bankers, insurers and government officials, which is credited with having generated larger Indian interest in Nepal's hydropower sector.