INDIA'S INVESTMENT POURS IN INFRASTRUCTURE DEVELOPMENT IN NEPAL
06 Sep 2015 | 22:16pm
KATHMANDU, Sept 7: The year 2014 was a remarkable year in the history of bilateral assistance as well as private investment to Nepal from India. Commitments of Indian investments from the government and private sector poured in the last year. The year also marked the signing of much-awaited umbrella agreement for trading electricity between Nepal and India. Signing of the Project Development Agreements (PDA) to develop Upper Karnali and Arun III hydropower projects as well as Indian Prime Minister Narendra Modi's announcement to provide Rs 100 billion line of credit (LoC), increasing the assistance by multifold, were the major happenings between Nepal and India last year.The 5,600-MW Pancheshwar Multi-purpose Hydropower Project, which had remained stagnant for 18 years, gathered momentum, in the same year and the preparation of Detailed Project Report is underway. Addressing Nepal's parliament in his visit in August last year, India's PM Modi had announced to kick start the project within a year by completing DPR.
Finance Secretary Suman Prasad Sharma explained all the favorable developments in the bilateral agreement as well as in investment fronts. "Despite procedural hassles, road and irrigation projects that amount to almost half of the pledged assistance of Rs 100 billion by the Indian government has already been completed in faster pace and these are indications of changes," added Sharma.Many attribute all these were only possible by the changed stance of India toward Nepal after PM Modi assumed power. According to officials, several bilateral issues concerning energy and water used to stall over minor glitches but Modi's visit provided a push forward.
"Progress in both mega hydropower projects (Upper Karnali- 900 MW and Arun III- 900 MW) is moving toward the right direction after the PDA signing last year," said Khagendra P Rijal, under-secretary at the Investment Board Nepal, the government entity that oversees the projects above 500 MW. GMR, developer of Upper Karnali has been working for Resettlement Action Plan and grounds works for land acquisition while Satluj Jal Vidyut Nigam Limited, developer of Arun III, is in the process of acquiring priority land from Nepal Electricity Authority. Both the developers have plans to complete all the preparatory works including financial closure within two years and start construction works.
Likewise, the Ministry of Energy of Nepal and Ministry of Power of India are active in implementation of the Power Trade Agreement. "A joint technical team under Joint Working Group led by joint secretaries of both the ministries has been working to devise master plan of transmission line as a ground work for building grid connectivity and to start trading electricity," said Sanjay Sharma, joint-secretary at the Ministry of Energy.
Construction of cross-border transmission line of Dhalkebar-Mujaffarpur is in the last leg and will be completed by the end of October after which Nepal will start importing electricity, though not in full capacity, due to delay in construction of a sub-station at Dhalkebar. The NEA has plans of importing up to 150 MW via the line to reduce loadshedding hours during the upcoming dry season. The line is being developed by forming a company in which both the countries have stakes.There are also three transmission line projects financed by Indian LoC and the tender process is underway for Koshi corridor 220 kV and Solu corridor 132 kV while the development process of Modi-Lekhanath transmission line is yet to be started.
Similarly, negotiations with an Indian consortium led by IL & FS company to develop Kathmandu Tarai Madesh Fast Track is also underway.Government officials and experts have stressed for reforms in project execution so that the story of contractor's non-performance will not prevail again. Non-performance of Indian contractors in Rahughat Hydropower Project and Hulagi Rajmarga -- developed in Indian assistance -- have led to the agreement with the Indian contractors being scrapped.
Similarly, a bilateral agreement has been signed recently with Indian Oil Corporation (IOC) to develop a cross-border petroleum pipeline to arrange smooth petroleum supply. IOC is to provide IRs 2 billion grants and Nepal is to invest IRs 750 million for the project.Projects being developed on Indian assistance, both grants and soft loans, are mostly related to infrastructure and have larger impact that pays socio-economic dividend for Nepalese people.The projects, if implemented on time, can help boost the country's economic growth but the lack of infrastructure has impeded growth and working environment.
By actual disbursement out of its commitments, India stands fourth or fifth in rank among donors and development partners in the recent years. The actual disbursement was only US$ 47 million in the fiscal year 2013/14. The investments in infrastructures can have long-term and sustainable economic development, said Secretary Sharma.
In addition to Rs 100 billion LoC announced last year, India has also pledged another Rs 100 billion assistance, of which 25 percent is grant and the remaining amount is LoC for the project of post-earthquake reconstruction and rehabilitation.