Indian companies lose interest in Nepal power deals

June 4th, 2008 - 3:23 pm ICT by IANS  

By Sudeshna Sarkar
Kathmandu, June 4 (IANS) After an initial rush to invest in Nepal’s potentially rich hydropower sector, Indian companies are now suffering from cold feet, thanks to continuing political uncertainty and other hindrances. While two new projects - the 300 MW Upper Karnali and 402 MW Arun III - were snapped up by Indian firms, a third, the 600 MW Budi Gandaki, has had Indian investors shy away from it.

However, when the government had invited bids for the third project, Indian companies dominated. Eighteen of the 29 companies who expressed initial interest were from India.

Many Indian firms that had vied for Upper Karnali and Arun III had shown an interest in the larger project. They included Larsen & Toubro, KSK Energy, Bhilwada Energy Ltd, Continental Construction and JSW Energy.

However, none of the 18 Indian companies who bought the bidding form joined in, despite the Nepal authorities extending the deadline thrice.

The 600 MW project has had no luck since the government of Nepal decided to open it to foreign investors two years ago.

Initially, only Chinese companies had made a bid. However, both were found to be ineligible by a committee formed by the government to assess the bids.

It is felt that despite the keenness expressed by both India and Nepal to jointly develop Nepal’s hydropower sector, private investors in India were becoming wary following the difficulties over Upper Karnali and Arun III.

Besides the long time taken by the government to make decisions, hydropower projects in Nepal with foreign investment have been running into legal hurdles, with NGOs or private individuals seeking judicial intervention to block the projects.

The Girija Prasad Koirala government is accused of selling lucrative power projects to Indian companies at the cost of national interests.

The Maoists, who could form the next government, have also been opposing the award of Arun III and Upper Karnali, saying such matters of national interest should have been decided only after the constituent assembly election.

Now, with the Maoists threatening to quit the government, there is fresh uncertainty about the political situation. Naturally, foreign investors are not ready to make any new commitment.

More complications can loom in future with Nepal having been proclaimed a federal republic.

The people from the areas where the hydropower projects are located are demanding a say in the deals before they are implemented. If they are serious about it, new projects would have to wait till the restructuring of the state and the formation of local governments, a task that will take years.

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