India, Nepal negotiating another major power project

Investment Board Nepal (IBN) and Satluj Jal Vidyut Nigam Ltd, India, the promoter of the 900-MW Arun III hydroelectricity project in Nepal have started fresh negotiations for a project development agreement (PDA). The negotiations that began Tuesday continued Wednesday and are likely to extend further, officials involved in the process said.

The template of the PDA negotiations will be same as the one that GMR India signed with IBN last month for the Upper Karnali project. Nepal will get 21.90 percent of the energy generated free from the project in eastern Nepal but both sides are yet to reach an agreement on division of the project's shares.

Officials told IANS that preparations were under way to sign the PDA of the project during the 18th Saarc Summit to be held in Kathmandu Nov 26-27. The estimated cost of the project is Rs.1 billion, According to IBN CEO Radhesh Pant, the meeting mainly focused on legal aspects.

"Legal teams from both the countries participated in the negotiation," said Pant, adding since there were not many issues to be resolved, the negotiation was likely to be completed soon.

One of the critical issues to be settled is share allocation to locals. Pant said Sutlaj was positive on allocating shares to the locals.

"We will definitely negotiate over the issue. There is a need for making the project bankable while allotting shares to the locals," he said, adding the number of affected people too will be taken into account while taking a decision.

The PDA template for Arun III will basically be similar to that of Upper Karnali Hydro Power Project. GMR India has agreed to conduct a study on downstream impact within six months from the PDA signing, and construct a re-regulating dam, if needed.

The IBN had sent the PDA draft to Satluj Oct 4. According to the agreement, Nepal will get 21.9 percent free energy, or 197 MW. Issues regarding facilities for locals, and the developer's corporate social responsibility initiatives are yet to be cleared.

The Nepal government and Satluj had entered into a memorandum of understanding (MoU) in March 2008. Sources say the much-awaited PDA is likely to happen on the sidelines of the 18th Saarc Summit in the presence of Indian Prime Minister Narendra Modi.

(Anil Giri can be contacted at girianil@gmail.com)