Friday, September 21, 2018

Budhi Gandaki again awarded to China Gezhouba

Reversing its predecessor’s decision, the government has awarded the contract for development of the Budhi Gandaki Hydropower Project to China Gezhouba Group Corporation (CGGC), without free competition.
The cabinet today has directed the Energy Ministry to sign agreement for the 1200-MW project to the Chinese company, which had – instead of Energy Ministry – applied directly to the Office of the Prime Minister.
The Office of the Prime Minister has then directed the Energy Ministry to bring a proposal to the cabinet. Energy Minister Barsha Man Pun – according to the Office of Prime Minister's directive – submitted the proposal to today cabinet meeting.
Instead of opening the project for international bidding, the cabinet has directed the Energy Ministry to award the biggest hydropower project to CGGC and sign the agreement after finalising the modality of construction. But the government has not brought policy regarding the engineering, procurement, construction and finance (EPCF) model, under which the Chinese company is planning to construct the project.
The Energy Ministry will now invite the Chinese company for talks and prepare a draft of the memorandum of understanding (MoU) before signing it. "The understanding will be signed to execute the project under the engineering, procurement, construction and financing (EPCF) model,” according to a source at the ministry.
Former Prime Minister Pushpa Kamal Dahal-led government on May 23, 2017 had decided to award the project to CGGC under the EPCF model without a bidding process. Then energy minister Janardan Sharma had signed the agreement with the Chinese developer.
However, the Sher Bahadur Deuba-led government on November 13, 2017 had scrapped the decision to award the $2.5 billion deal with the CGGC and awarded it to the Nepal Electricity Authority (NEA). The government has been collecting fund by charging Rs 5 per litre of petroleum products to construct Budhi Gandaki Hydropower Project.
The Dueba-led government had also formed a committee under then National Planning Commission (NPC) vice chair Dr Swarnim Wagle – including finance and energy secretaries, and Nepal Rastra Bank (NRB) governor and managing director of NEA – to study investment mode.
The Wagle-led committee had suggested that the government develop the project on its own by providing viability gap funding, covering around one-third of the project’s development cost. The Deuba-cabinet approved the committee report and agreed to provide the gap funding. But the plan never materialised as the government changed before the decision could be minuted. The new administration under Oli, who had publicly criticised Deuba’s decision to scrap the deal with the Chinese company, disowned the previous administration’s decision.
Prime Minister KP Sharma Oli had pledged to revert the decision, if he were elected to power in the elections. Oli became prime minister in February after his Party – Nepal Communist Party (NCP) – scored a landslide poll victory, which according to some experts was funded by the CGGC.
Initially, the project was supposed to be developed under a development committee model. In 2011, the Baburam Bhattarai-led government had formed the Budhi Gandaki Hydroelectric Project Development Committee to execute the project.
The government has allocated Rs 18 billion for compensation payments and operational expenses for this fiscal year, as more than 8,000 households will be affected by the project, according to the report. 

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