Tuesday, February 13, 2018

Cabinet approves Rs 94 billion viability gap funding for Budhi Gandaki

The government is providing Rs 94 billion as viability gap funding (VGF) – as recommended by the National Planning Commission (NPC) – for the development of the 1,200-MW Budhi Gandaki Hydropower Project with domestic resources.
A cabinet meeting on Friday (February 9) has decided to issue the grant equivalent to around one-third of the project’s estimated cost. The viability gap funding is provided to important infrastructure projects that may not be financially feasible.
The storage-type hydropower project Budhi Gandaki that is located in Dhading and Gorkha districts in central Nepal is estimated to cost $2.6 billion (approximately Rs 270 billion). The construction is expected to take eight years.
According to the spokesperson at the Energy Ministry Dinesh Kumar Ghimire, the cabinet has informed the ministry about the decision. "However, the ministry is yet to receive a formal letter from the Prime Minister’s Office,” he said, adding that the ministry will start the project development process and look for other sources of funding once they receive the formal letter.
The planning commission had started looking for implementation and funding modalities for the construction of the Budhi Gandaki Hydropower Project after the Prime Minister Sher Bahadur Deuba-led government terminated the memorandum of understanding (MoU) signed with China Gezhouba Group Company (CGGC) to build the project under the engineering procurement construction and financing (EPCF) model.
After cancelling the agreement with the Chinese company, Deuba government decided to construct the project by itself through Nepal Electricity Authority (NEA). Subsequently, the government formed a committee led by NPC vice chair Swarnim Wagle to look for financing options to build the power plant.
However, with a new government, the decision seemed to lose its validity as the premier Kp Sharma Oli had publicly criticised Deuba’s decision to scrap the MoU with the Chinese company. Oli had also openly pledged to reinstate the deal after becoming prime minster.
According to the National Planning Commission (NPC) report, the government should provide gap funding covering around one-third of the project’s total development cost. "The NPC submitted the report to former energy minister Kamal Thapa, who took the proposal to the cabinet."
If the project is built through a special purpose vehicle, the government may provide viability gap funding of Rs 94 billion to the developer, according to the NPC report.
According to the report, the funding is needed for land acquisition and resettle locals, who will be displaced by the project. If this amount is deducted from the project cost, the developers will have to invest only Rs 176 billion and it will raise the return on the investment.

NAC lacks pilots to fly Chinese aircraft

Though Nepal Airlines Corporation (NAC) now has 4 Harbin Y 12-e aircraft in its fleet – after it received 2 aircraft today – the national flag carrier has only 3 pilots to command the aircraft.
The airlines need to have 8 pilots to fly according to the schedule, but with only 3 pilots at present, the aircraft seem to remain in the parking lot until the NAC recruits pilots to fly them. Under present circumstances, the new aircraft will remain grounded at the airport.
According to Civil Aviation Authority of Nepal (CAAN) rule, airline companies should have five pilots – 2 captain and 3 co-pilots or 3 captains and 2 co-pilots - per small aircraft.
Two new Chinese aircraft procured by NAC from China landed at the Tribhuvan International Airport (TIA) in Kathmandu today. According to NAC, 2 Harbin Y 12-e aircraft landed at the TIA today afternoon at the interval of half an hour.
The new aircraft will be coming via Dhaka, Bangladesh and will be flown by foreign pilots.
The NAC is looking for senior flying crews for the Y12e. It has also published an advertisement to hire foreign captains.
A team of NAC left for China to take delivery of the 2 remaining Chinese-made Y-12e planes on January 30. CAAN has given the new aircraft 9N-AKU and 9N-AKV call signs, according to the NAC.
The two 17-seater aircraft are a part of grant and loan agreement that Nepal had signed with China's AVIC International Aero-Development to procure 6 aircraft, 2 MA 60s and 4 Harbin Y 12-e aircraft in November 2012. Of them, one MA 60 and one Harbin Y 12-e were grant – by February last year and are conducting domestic flights – while China has arranged concessional loan to purchase on MA 60 and three Harbin Y 12-e aircraft.
The first batch of two Y12e arrived in Kathmandu in 2014, and were intended to serve remote mountain airfields like Lukla, Jomsom, Manang, Simikot, Rara, Jumla and Dolpa. But the aircraft faced regulatory limits, which meant they could only fly to airports with a maximum grade of up to 2 per cent or about 1.2 degrees of slope.
As a result, the Y12e have been only operating on the Pokhara and Simara sectors, pending the issuance of a certificate by the manufacturer clearing them to serve airports with a slope of more than 2 degrees.
The cost of 4 aircraft is $ 35 million, said the NAC that has repaid most of the loans and only around $3.5 million is remaining.
NAC will now have a total of 8 aircraft for domestic destinations, though it lacks enough pilots to fly them. With the new planes, the NAC has planned to fly them to some faraway cities, including Dang in the mid-western region and Janakpur in eastern region and some remote airports.
The national flag carrier plans to increase its share in the domestic sky with new aircraft. The stakeholders, however, fear that the aircraft might turn white elephants due to its high maintenance cost and low productivity.

Monday, February 12, 2018

Remittance inflow drops for third month in a row

Remittance – sent home by Nepalis working abroad – growth rate fell for the third consecutive month in the current fiscal year.
The drop in growth of remittance inflow could exert pressure on foreign exchange reserves that needs to remain robust to support imports.
The drop in growth rate – from the fourth month in mid-November – continued till the sixth month in mid-January, according to the latest Macroeconomic Report of the central bank. Remittance has been the life line for battered economy since the last one decade. Lately, the banks and financial institutions have been largely dependent on remittance for the more lending. The remittance, which is almost equivalent to 32 per cent compared to the gross domestic product (GDP), inflow growth rate dropped by 0.5 per cent to Rs 340.5 billion in the six-month period between mid-July and mid-January of the current fiscal year. However, during the the same period in the last fiscal year, growth rate of remittance inflow had jumped by 5.7 per cent, the central bank report reads.
The drop in the growth rate of remittance is supported by the drop in the number of migrant Nepalis workers. The country has seen a drop in Nepalis going overseas for work since last two years after the devastating earthquake. The drop in migrant Nepali workers has continued in the current fiscal year as the number of outgoing migrant workers posted a decrease of 1.8 per cent in the six-month period.

ADB provides $100 million loan assistance to Nepal

Asian Development Bank (ADB) has agreed to provide $100 million to Nepal for the Rural Connectivity Improvement Project. Finance secretary Shankar Prasad Adhikari and country director of Nepal Resident Mission of ADB signed the agreement and exchanged it at the Finance Ministry  today on the behalf of their respective institutions.
Adhikari after signing the agreement expressed appreciation to the ADB for this assistance and its continued support in the socio-economic development of Nepal.
The project will upgrade 388-km of rural roads to all-weather standards, serving the agriculture sector and bring access to 7.5 million people in 16 districts, according to a press release issued by the Asian Development Bank (ADB) Nepal.
The project, in line with the goal of the government's Agriculture Development Strategy (ADS), was signed in 2015 to encourage commercial agriculture, increase productivity, create new rural jobs and increase prosperity.
The project aims at increasing transport efficiency on project area. "It shall improve the rural road conditions between the selected rural communities, agriculture production areas and enhance capacity of rural infrastructure agency and road users in project areas," the ADB press note further read.
Likewsie, ADB has also agreed to provide $1 million to restructure the Department of Local Infrastructure Development and Agricultural Roads into a state-of-the-art rural road agency. The project is expected to be completed by January 31, 2023.
The ADB, conceived in the early 1960s as a financial institution, assists its members and partners by providing loans, technical assistance, grants and equity investments to promote social and economic development.