MoI makes slew of recommendations for upcoming budget

The Industry and Investment Promotion Sub-Committee (IIPC) at the Ministry of Industry (MoI) has made slew of recommendations to the Ministry of Finance (MoF) to incorporate in the budget for the fiscal year 2013/14.
“The IIPC has, among others, recommended to the government to announce subsidies and waive off income tax and VAT in a bid to give leverage to industrial development and attract fresh investment in infrastructure development,” Bishnu Dhakal, under secretary at MoI, told Republica on Tuesday.
The IIPC has asked the government to provide subsidy on seeds to jute farmers. Other suggestions include provision of VAT rebate for dairy firms, customs duty waiver on imports of machines by small and cottage industries, and subsidized loan to factories aim to substitute import of meat and meat products.
Similarly, the IIPC also requested to the government to allow sick industries to sell property pledged as collateral to get bank loans and slap one percent customs duty on import of machines used for measuring standard and quality of goods and import of coal by cement factories.
Dhakal said the IIPC, however, has suggested that the government increase customs duty on import of clinker by cement factories. “The MoI wants the domestic cement factories to source raw materials locally,” he added.
The IIPC has suggested that the government waive off income tax for firms operating inside IT Park in Banepa and Special Economic Zones different parts of the country. It has also proposed VAT rebate for firms that utilize garbage to produce different goods.
Likewise, the IIPC has asked the finance ministry to provide discount on income tax to firms that process medicinal herbs.

Govt, ADB, WB prioritize investment in energy sector

Realizing that acute power shortage is affecting people´s daily life and inflicting huge loss on industrial sector, the government, Asian Development Bank (ADB) and the World Bank (WB) have put investment in hydropower sector in their first priority.
“Investment in hydropower sector is the top priority of the upcoming budget for fiscal year 2013/14,” Finance Minister Shankar Prasad Koirala told Republica about a week ago while interacting with a team of business journalists from Nepal Republic Media.
Asian development Bank (ADB), a multilateral development partner working in the Asia-Pacific region, has declared that its first priority will be in the energy sector in the coming days. "Our priorities have been changed; we are totally focused on the energy sector in Nepal," Kenichi Yokoyama, country director of ADB Nepal Resident Mission, said at a program organized in the capital last week.
The ADB, which is currently working on identifying viable hydropower projects for investment, has already decided to invest US$ 150 million in Tanahun Hydropower project (140 MW) -- the second reservoir type project in the country after Kulekhani.
Moreover, the Manila-based multilateral lender is also pushing for reforming and restructuring of the Nepal Electricity Authority (NEA) - the state-owned energy monopolist.
“ADB´s country strategy paper (CSP) has put energy sector in the first priority. Development of transmission lines and distribution of power is more important," Yokoyama said in his keynote speech delivered in a seminar on ´Wind Energy Development and Use: Nepalese Perspective´ in Kathmandu last Friday.
Similarly, the World Bank has also hinted that it is interested to invest in the energy sector. The World Bank´s investment in the development of cross-border transmission lines, especially in 400 kV Dhalkewar-Majjafarpur transmission line, speaks volumes about its interest in the energy sector.
The government also has also said that it would allocate substantial amount of budget in development of transmission lines in the country to evacuate power generated by different hydropower projects.
“The government will encourage private sector to invest in the hydropower sector by developing adequate infrastructure to evacuate power generated by their projects,” Finance Minister Koirala said.
Meanwhile, Minister Koirala also said that the government would expedite the process of signing power purchase agreement (PPA) with different hydropower projects.
At present, the government has put around 52 hydropower projects with total installed capacity of more than 4000 MW in its priority basket.
"The government is ready to invest in these projects on its own,” Gokarna Raj Pantha, senior divisional engineer at the Department of Electricity Development (DoED) said. "It can hand over these projects to the private sector, including domestic and foreign investors, if need be."

PDA talks with GMR on two mega projects ongoing

The government is holding project development agreement (PDA) negotiations with GMR, an Indian infrastructure developer, for two large scale hydropower projects, namely 900 MW Upper Karnali and 600 MW Upper Marsyangdi.
Nepal Investment Board (NIB), a high level government entity that facilitates the implementation of large scale infrastructure projects (of 500 MW and above), is engaged in the PDA negotiations with the developer since last week.
"A taskforce comprising members from NIB, British legal consultant firm Herbert Smith, and the developer has been formed to sort out some of the issues that have been raised during the first round of negotiations," a high level source told Republica.
According to the source, the taskforce has been given two weeks to identify a common point that both the government and the developer can agree on. "The taskforce that has been having its meeting in a row has already spent almost a week," the source revealed.
NIB, which was formed almost one and half years ago in a bid to carry out the implementation of large scale projects in fast track mode, has formed a PDA negotiation team with Radhesh Pant, NIB chief executive officer as coordinator. Other members of the team include representatives from the Ministry of Energy (MoE) and Ministry of Finance among others.
"PDA talks are going on," Keshav Dhwaj Adhikari, joint secretary at the MOE, who is also a member of the team, said declining to divulge the details. "We are not allowed to talk to the media."
The government had allowed GMR Upper Karnali Hydropower Company and Himtal Hydropower Company - subsidiaries of GMR - to increase their capital and set up offices in New Delhi in December 2012.
GMR, which has applied for power generation license of Upper Karnali, has not signed the project negotiation agreement (PNA) so far. NIB has been asking GMR to sign the PNA for the last one month. Normally, PDA is signed within 18 months of signing a PNA.
The survey license that the government granted to GMR for Upper Karnali in May 2008 expired in last May. The developer should apply for a power generation license if it wants to secure the project in hand.
Similarly, the two subsidiaries of GMR have increased their authorized and issued capital from Rs 450 million to Rs 1.9 billion for each of the companies.
Additionally, NIB is also working to start PDA talks with Sutlej Jal Vidyut Nigam, another Indian state-owned power developer, for 900 MW Arun III. According to a source close to the developer, Sutlej is arguing that it does not want to sign PDA as it is an Indian government-owned company.