World Bank boost for Nepal ventures of GMR, Sutlej

July 22nd, 2008 - 2:00 pm ICT by IANS  

By Sudeshna Sarkar
Kathmandu, July 22 (IANS) After facing protests from local organisations, two Indian companies that signed separate agreements with the government of Nepal to develop hydropower projects in the Himalayan republic have received a fresh shot in the arm from the World Bank, which has pledged to provide partial funding for the ventures. According to Anita George, director of infrastructure at the World Bank’s International Finance Corporation (IFC), IFC will finance 25 percent of the total investment required for the 402 MW Arun III and 300 MW Upper Karnali projects, upon the request of the two Indian companies that hold the licence to develop them.

GMR Energy Ltd became the first Indian company to bag a hydropower project in Nepal after it pipped nearly a dozen other Indian rivals to win the licence for the Upper Karnali project.

Arun III was awarded soon after that to Sutlej Jal Vidyut Nigam, in which India’s central government as well as the state government of Himachal Pradesh hold the stakes.

The Upper Karnali project would require an estimated investment of about $450 million while Arun III would need about $860 million. However, Nepal’s hydropower projects tend to overshoot estimations due to protracted delays caused by political turmoil and opposition by local organisations.

The government of India had initially shown interest in Upper Karnali but withdrew after fierce opposition by Nepal’s parties. Even now, Maoist-supported organisations in the region have been demanding the scrapping of the deal with GMR, saying it should go forward only after Nepal has been restructured into autonomous states which would control their own projects.

Arun III has also been generating dissent, with the locals demanding a share in the equity. Arun III officials have been reported as saying that after handing over the free shares to the government of Nepal as per the memorandum of understanding (MoU) signed in March, they would not sell any more of the shares in Nepal.

The investment in the Indian companies’ projects will be a forward leap for the IFC in Nepal’s hydropower sector. So far, its investment has been limited to 10 percent each in two minor projects - Khimti and Bhotekoshi.

George, who is in Kathmandu to take part in a workshop on hydropower project financing, said IFC would invest $38 million in infrastructure in Nepal, of which the lion’s share - 80 percent - will be in hydropower projects.

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