Ahead of PM Modi’s visit, Nepal grants power generation licence to Indian company

Nepal has granted an Indian government-owned subsidiary the power generation licence from a 900-megawatt hydropower project, days ahead of Prime Minister Narendra Modi’s two-day visit to the country from May 11.

Investment Board Nepal (IBN) recently granted the licence to Satluj Jala Vodyut Nigam Power Development Company, a subsidiary of Indian government-owned Satluj Jal Vidyut Nigam Ltd, to generate power from the Arun-3 Hydropower Project located in eastern Nepal.

The permit was granted in line with the decision of the 30th meeting of IBN’s board of directors chaired by Prime Minister KP Sharma Oli on April 28, according to an IBN official.

The company has paid the board Nepali Rupees 5 million as licence fee.

Modi and Oli are expected to jointly lay the foundation stone for the hydropower plant.

Arun-3 is the largest capacity project in the history of hydroelectricity that is scheduled to be constructed within the next five years.

The Indian government has so far approved investment of Rs 57.24 billion proposed by SJVN in Arun-3. Arun-3 is an export-oriented project and it will sell the electricity to India, a Nepalese media report said.

However, it has to sign an agreement with power utilities in India to sell the power in a bid to achieve the financial closure, it said.

The project was supposed to be constructed under the assistance of the World Bank Group some two decades back.

However, protests against reservoir projects back then forced the World Bank to drop the project, it said.

The project was later awarded to the Indian company through competitive bidding some 10 years ago.

IBN has granted several extensions for financial closure of the project.

Apart from the local share and free energy to the residents of the affected area, the Nepal government will receive benefits worth Nepali Rupees 348 billion from the project as royalty, income tax, customs tariff and free energy in the concession period of 25 years.

The project will also provide 21.9 per cent or 197 megawatts of the generated energy free of cost to Nepal.