Bad business

ECONOMIC MEMOIR OF 2012

In a recent World Bank report, Nepal fell from 107th to 108th position in the ‘Doing Business Index’. Unsurprising, given that Foreign direct investment (FDI) commitment in the period declined substantially: the government’s ambitious plan of bringing in US$ 1 billion in FDI could not be accomplished, not by a long shot, nor could the Investment Year 2012/13 kick off on time. The International Monetary Fund (IMF) labeled Nepal’s private sector a weak player in national economy. Inflation continued on its upward tick, and so did hours of load shedding. Why did things go so badly wrong in 2012?
The country’s vital institutions fell far short of delivering the expected results. In their recently published book Why Nations Fail?, Daron Acemoglu and James Robinson argue that the prosperity of a country depends on the nature of its institutions and not the country’s historical, cultural or geographical background. Our weak institutions aren’t even able to carry out their regular work, let alone devise innovative ways to boost performance.

PHOTO: ARTMAGZIN.FILES.WORDPRESS.COM
The institutional failures were there for all to see. First of all, the Ministry of Agriculture Development (MoAD), assigned to ensure the availability of chemical fertilizers to farmers during plantation season, failed in its task, resulting in significant decline in paddy production. According to MoAD, paddy production is estimated to fall by 11.3 percent (to 4.5 tons) this year, inflicting a loss of Rs 12 billion on the national economy.
In another misguided move, the government decided to fix the maximum retail price (MRP) of some essential commodities, drawing widespread criticism from the private sector. The government’s move was supposed to provide some relief to consumers from galloping inflation. Unfortunately, the government’s immature decision ended up making people pay even more than they were paying before the price fix. This was owing to the failure of the Ministry of Commerce and Supplies (MoCS), entrusted to enforce laws and monitor the market, to ensure proper monitoring of prices in line with the government announced MRP.
Third, public enterprises like Nepal Electricity Authority (NEA) and Nepal Oil Corporation (NOC) continued to underperform due to red tape, unresponsive bureaucracy, and lack of political willingness to vital reforms.
Fourth, the vital sectors of the economy continued to perform poorly compared to previous years. The contribution of manufacturing to gross domestic product (GDP) fell to 6.2 percent, the lowest in a decade. The services sector, though still doing well in comparison, is also not performing up to the desired level. As a result, overall growth has declined to just 3.8 percent in the current fiscal year, and achieving double digit growth appears a distant dream.
Fifth, remittance, the economy’s only reliable lifeline, continues to increase gradually, but most of it is going into unproductive areas. The scenario of foreign employment is sadly worsening.
Sixth, the gap between import and export is ever increasing. We have always been inefficient in tapping the duty-free and quota-free facilities granted by countries such as China, the US and the European countries. The government has not been able to hold regular bilateral meetings with the US, which have been due for one and a half years.
Looking at the big picture, year 2012 started with a hope that the country would get a constitution, which would spell the end of the long transition. People were expecting a constitution that would lay the country’s economic foundation. Instead, there seems to be more turbulence ahead.
The private sector, for its part, is afflicted by political instability, power shortage and labor unrest. Over three dozen firms recently scaled down production by as much as 50 percent owing to energy shortage. Like the public sector, the private sector is extremely inefficient, politicized, corrupt and unresponsive. The main reason behind the privatization of public enterprises after 1990 was to make them more competitive and professional. Unfortunately, two decades later, the private sector still seems to be in wilderness. The private sector’s unnecessary lobbying and unethical activities have damaged the country’s trade with neighboring as well as faraway countries. The case of illegal re-exporting of goods such as beetle nuts and pulses, among others, came to light this year.
Political instability aside, the crucial question is: how can the private sector make itself effective even during transition? Most private sector players are still busy in dirty political games than in doing business. Their unholy engagement in politics has ultimately cost the national economy a lot.
Our private sector’s effectiveness is far below that of other South Asian countries, where private sector continues to perform well despite political instability. For instance, the private sector in Bangladesh, which has seen many more political upheavals than Nepal, has proved to be the country’s growth engine.
In short, though there has been progress in certain areas, the year 2012 was largely disappointing for businesses and national economy. As things stand, 2013 is shrouded in even more uncertainty. Let us hope our politicians can get their acts right in 2013 and work at getting the country on track to economic prosperity.

New CNI leadership unveil 9-pt action plan

The new team at the helm of Confederation of Nepalese Industries (CNI) on Sunday unveiled a new action plan that, among others, aims to restore good industrial relation in the country.
The action plan has been unveiled at a time when domestic and foreign investors are hesitating to put their money here, citing worsening industrial relation.
“There will not be major departure from the long-term vision and mission of the organization. The new action plan, however, has incorporated some policies, including restoring good industrial relation to boost investors´ confidence,” said Narendra Basnyat, newly elected president of CNI, unveiling the nine-point action plan.
The action plan, however, is silent on the ways to improve labor relation in the industrial sector.
CNI has also said that it would lobby with concerned government agencies for industry friendly policies and programs. “We will lobbying for new special economic zone (SEZ) bill, industrial enterprises act and policy on foreign direct investment that would be compatible with the government economic policies to be adopted under upcoming federal structure,” added Basnyat.
Promoting export oriented projects by attracting more foreign investment into the country is also among the top priority set by the action plan.
"We need huge investment from foreign and domestic investors to achieve double digit growth," said Hari Bhakta Sharma, senior vice president of CNI.
CNI has also expressed commitment to promote social business so as to make efforts for reducing poverty. "As the responsible business people, we will never deviate from our social responsibility. So, promotion of social business is also one of our top priorities,” Basnyat added.
CNI´s new leadership has also urged the government and political parties to end existing political impasse at the earliest so as to create favorable economic environment in the country. The organization has also reiterated its demand for allowing Nepali businessmen to invest abroad.

Import of additional power from India to take 4 months

It will take up to four months to import power from India even though the Indian government expressed commitment to export additional 55 MW power to Nepal during President Dr Ram Baran Yadav´s five-day visit to southern neighbor, officials said.
"People might have to wait for the next four months for the load-shedding hours to actually go down," said Rameshwar Yadav, managing director of the Nepal Electricity Authority (NEA).
Yadav, who will visit India next week to arrange logistics for the import of electricity from India, attributed the delay to transmission line constraints. "Our existing transmission lines have the capacity to import around 180 MW," Yadav said. "But it would take around four months to fix some technical issues."
Nepal currently imports a total of 115 MW of electricity from India. "However, we will import additional electricity from India in this very dry season," Yadav said, adding that his visit to India will focus on other mid-term plans for load-shedding reduction.
India had agreed to provide a total of 200MW electricity to Nepal during Prime Minister Baburam Bhattarai´s visit last year. "We will have meetings with officials from Power Trading Corporation of India (PTC) to push them to work speedily in expanding transmission lines on the Indian side," Yadav said.
Additionally, during the meeting, the team will also discuss speeding up the process of upgrading Dhalkebar-Muzaffarpur (400 KVA) transmission line. "We have almost completed work on our part," Yadav told Republica. "We will now ask Indian officials to speed up their work."
In November 2009, NEA and Indian stakeholders -- PTC, Infrastructure Leasing & Financial Services (IL&FC) and Power Grid Corporation of India Ltd (PGCIL) -- had set May 2010 as the deadline for completion of the Power Purchase Agreement (PPA) and financial closure of the project. However, nothing has been completed so far.
"Absence of cross-border transmission line is a major bottleneck for power trade between the two countries," Yadav said. "We will focus on completing the task of financial closure of the project."
Meanwhile, independent experts claim that the import of power from India will not materialize during this dry season. "There are several technical problems," a hydropower expert said. "India´s commitment has come just as a courtesy to show that India is concerned about Nepali peopl

Govt to revive Birgunj Sugar Factory

As part of its bid to reopen state-owned manufacturing industries, the government has appointed Board of Directors (BoD) at the Birgunj Sugar Factory (BSF) to carry out necessary ground works for bringing the factory back into operation.
Ministry of Industry (MoI) has formed ad hoc board under the chairmanship of Dhurba Lal Rajbansi, director general of the Department of Industry (DoI).
"We have been given two mandates," Rajbansi told Republica. "One is to prepare bidding documents to call an expression of interest (EoI) from different private sector agencies to reoperate the factory. The other is to identify ways to manage some 193 former workers of the factory that have denied golden handshake offer.”
The MoI took the step mainly after the Public Enterprises (PE) Board gave its nod to resume the operations of the factory by handing it over to the private sector so that no liability comes to the government. "The board will also calculate the cost of managing the 193 workers,” added Rajbansi.
The factory was closed nine years ago after it started making losses due to problems such as over-staffing and continuous shortage of raw materials -- sugarcane. Though the government had decided to liquidate the factory nine years ago, it had not materialized due to pressure from local political leaders.
Earlier, in 2009, the then finance minister Babu Ram Bhattarai, who is now the Prime Minister, declared that he wanted to see the factory in operation. "We are working on ways to resume operation of the factory as soon as possible," Yam Kumari Khatiwada, joint secretary at the MoI, said.
PE Board, which took the decision to handover the factory to private sector, has suggested the government to manage the 193 workers first. “Dues that the factory owes to the workers must be cleared before handing it over to the private sector,” Bimal Wagle, chairman of the PE Board, told Republica.
Wagle said the government should invite business proposals from interested parties on how they intend to operate the factory. “We have submitted our report to MoI,” Wagle said, adding, “The board formed by the government will now implement the recommendations that we have made in the report."
In March, Agricultural Industry Cooperative, a local entity, had proposed to the government to restart operation of BSF by making fresh investment of Rs 150 million.
Meanwhile, the government is mulling over liquidating the Hetauda Textile Factory (HTF). "Efforts are underway to liquidate the factory," a source privy to the issue told Republica.
Though Madhav Kumar Nepal-led government had decided to liquidate the loss-making entity in 2009, PM Bhattarai then had expressed dissatisfaction over the decision.
HTF was closed eight years ago after it started making losses. Its losses had started to pile up after its products failed to compete with cheaper imports. The factory was employing 1,200 workers.

Cabinet nod sought for sick industry revival package

The government has taken a step toward granting legal status to a report that recommended a slew of incentives such as loan restructuring and interest waiver to sick industrial units. The report was prepared over a year ago but remains unimplemented in the lack of cabinet´s approval.
The Ministry of Industry (MoI) has submitted the report prepared by Sick Industries Rehabilitation High-Level Task Force (SIR HLTF) -- a committee headed by National Planning Commission Vice-chairman Deependra Bahadur Kshetry -- to the cabinet on Thursday.
MoI, which was earlier entrusted with the responsibility to implement the recommendations of the report, has forwarded it to the cabinet for approval. The report has recommended various incentives and facilities to sick industrial units.
"The ministry has submitted the report to the cabinet on Thursday," a high level official at the MoI told Republica. "The ministry has so far been unable to provide any facilities recommended by the report since the cabinet has yet to endorse the report."
Previously, the Office of the Prime Minister and Council Ministers (OPMCM) had forwarded the report to the MoI for its effective implementation. The ministry formed a technical committee in order to identify sick industrial units. The committee that has the mandate to recommend the names of sick industrial units has recommended three firms, namely Shree Nepal Boarders, Birat Leather and Birat Shoes as sick industries, said the official, who requested anonymity.
According to the official, industrial units declared as sick are entitled to over a dozen facilities.
The report recommends financial incentives like, making arrangement for soft loans, restructuring of loans, providing additional loan from banks if needed, extending the loan repayment date, and incentives to rearrange the bad loans of sick industrial units.
However, the recommendations that are in the report are difficult for the MoI to implement. “Many things should be in place and functional to make this report effective,” said the official.

Sutlej asks for access road, policy consistency before PDA

The government and Sutlej Jal Vidyut Nigam, which is developing 900 MW-Arun III hydropower project, held discussion on a slew of issues such as completion of access road and policy consistency on project development agreement (PDA), among others, on Wednesday.
"Sutlej asked us to build access road to the project site and increase the concession period--the period for which a developer retains project ownership--in the meeting," a government official who took part in the discussion told Republica.
The government can give a maximum of 35 years of concession period to a developer as per the existing Build-Own-Operate-Transfer (BOOT) Act. However, the government has given only 25 years of concession period to Sutlej.
The government, which is responsible to build access road to the project site, has just completed opening tracks.
According to the official, the meeting between Sutlej--state owned Indian power developer--and the Nepal Investment Board (NIB) mainly focused on laws and their consistency. "Sutlej has asked Nepal government whether it can import required construction materials from India," the official said on condition of anonymity.
A team of officials from the New Delhi based head office of Sutlej, led by R K Agrawal, managing director of the Business Development and Management Service, Sutlej, visited Nepal aiming to finalize the deal towards inking on PDA.
"The PDA with Sutlej for Arun III will be completed by next two months if the negotiations continue on the same pace," the official further said.
Additionally, Sutlej has sought strong commitment from the government on different policies such as income tax, excise duty on the export of produced power, value added tax and allocation of amount for forestry development from the total income of the project.
"The officials from Sutlej enquired whether the government can ensure consistency of the existing income tax policy during the entire project period," said the official close to the developments.
According to the official, Sutlej officials made it clear that they wouldn´t be able to spend five percent of their total income on the forestry sector. The government had introduced a law recently that requiring hydropower producers to spend five percent of their total income on the forestry development.
"That´s not practical for us," the official quoted Sutlej team.
Arun III is a run-of-the-river project based in Sankhuwasabha district.
Sutlej was selected to prepare a detailed project report (DPR) through a global bidding in 2008. As of now, Sutlej is on the verge of completing survey license.

IFC to prepare bid documents for TIA

International Finance Corporation (IFC) under the World Bank (WB) Group is helping Nepal prepare bid documents required to call Expression of interest (EoI) for upgradation works at Tribhuvan International Airport (TIA).
The IFC offered to prepare bid documents after Nepal Investment Board (NIB) decided to start afresh process of selecting a contractor for upgrading and handing over management of TIA after its bid to handover the project to an Indian firm failed.
Earlier in July, NIB had prepared to handover the project to Indian firm Infrastructure Leasing & Finance Corporation (IL&FS). The move, however, couldn´t materialize after the Supreme Court issued a stay order against the decision.
“IFC offered its support after NIB - with the consent of Attorney General Mukti Pradhan - decided to invite global tender for the project,” a source at NIB told Republica.
According to the source, the New Delhi-based South Asia regional office of IFC is in touch with NIB.
NIB, which was formed under the Investment Board Act 2011, has no technical capacity to develop the required bidding documents.
"NIB accepted the IFC´s proposal as it lacks the capacity to develop bidding documents on its own,” the source added.
The government had handed over 14 mega projects, including Kathmandu-Terai Fast Track, Upgrading and Management of TIA, Kathmandu Metro Railway and 5 mega hydropower projects to NIB, in May in order to implement them in a fast track mode.
As per the source, Bhanu Mehrotra, senior investment officer of the IFC regional office, has been leading the task of preparing bidding documents.
Currently, the Civil Aviation Authority of Nepal (CAAN) is looking after the management of TIA.
The project to upgrade and enhance the capacity of the country´s only international airport is being carried out under Asian Development Bank´s assistance of US$ 80 million -- $70 million in loans and $10 million in grants. The government has also invested $30 million in the project.

CNI appeals for more investment

Confederation of Nepalese Industries (CNI), the umbrella organization of Nepali industrialists, has appealed both local as well foreign investors to raise their investment in Nepal.
“Nepal holds immense potentials for investment. It is the right time to invest here and reap maximum benefits,” Hari Bhakta Sharma, vice president of the CNI, said, presenting a working paper at the special session of the 10th Annual General Meeting of CNI on Sunday.
Given the increasing demand for energy within domestic market as well as in India, Sharma said hydropower is one of the best sectors for investment in the country. “The country has the capacity to generate 83,000 MW, of which generation of 43,000 MW is feasible technically,” Sharma said in his working paper on ´Prospects and Challenges on Enabling Investment in Nepal´. “Farming of high value agriculture products and agro-processing industries also hold immense potentials here.”
Speaking on the occasion, former finance minister Surendra Pandey said Nepal has been failing to attract investment despite having high potential in different sectors. “Deteriorating labor relation and rise in labor costs are the major factors hindering the development of industrial sector,” said Pandey.
The AGM, which concluded on Sunday, was mainly focused on ways to develop country´s industrial sector and establish good labor relations.
Industrialists have urged the government and all the political parties to come up with a common minimum economic agenda at the earliest so as to give a boost to economic activities.
“The minimum economic agenda is a must to lure investment and also keep the nation´s economy buzzing. We have to strengthen formal economy and discourage informal economic activities,” said Sharma.
Basnyat elected CNI prez
KATHMANDU (REPUBLICA): The 10th Annual General Meeting of Confederation of Nepalese Industries (CNI) on Sunday unanimously elected Narendra Basnyat as its new president.
Basnyat was senior vice president in the outgoing executive committee.
"I will put my best efforts to accomplish the vision and mission set by CNI,” Basnyat told Republica after his election to the post. He further added that there won´t be major departure from CNI´s current strategies and programs. “My main priority will be to attract more investment in the country. We will continue to lobby with the authorities concerned to create favorable investment climate.”
Outgoing president Binod Kumar Chaudhary has been named CNI´s president emeritus.
Basnyat is the chairman of the Bank of Kathmandu and president of Nepal USA Chamber of Commerce and Industry.

Govt eases visa process, takes renewal requests

The government has adopted an integrated visa issuance procedure, aiming to enable foreigners working in multinational and joint venture companies to enter Nepal with relative ease, and has also started renewal and approval of visas for them.
It had stopped processing visa requests since about two months ago, admitting that the existing procedures were not clear and posing difficulties for applicants seeking renewal of work visas.
“On Friday, we introduced the integrated checklist of documents that companies need to submit and the procedures they need to follow for getting visas for foreigners working in Nepal,” Bishnu Dhakal, under secretary at the Ministry of Industry (MoI), told Republica.
With the introduction of new arrangements, he said, the Department of Industry (DoI) has resumed processing their issue and renewal applications as well.
Under the new arrangements, any company hiring foreigners need to submit more than a dozen documents at DoI, including application letter, certificate of industry registration, certificate of PAN registration, original copy of vacancy notice published in a broadsheet Nepali daily to confirm that there is no candidate available in Nepal for the particular work, and details of facilities that the company provides to the foreign employee, among others.
The new arrangement says that companies can employee foreigners in two ways only. One is under technology transfer agreements and the other is by advertising the vacant post. To get a visa under the latter arrangement, the company needs to prove that there is no local manpower suitable for the post.
"The new process will help us identify genuine requirement for foreign workers in a company," said Dhakal, adding that the government will now be processing visa applications under the newly introduced procedures.
The government had decided to introduce an integrated system to issue new visas and renew work permits to foreign workers in order to cater to their needs through a single window.
“Previously, companies were required to go to different offices to get clearance and acquire work permits for their foreign staff. The new integrated system has ended that practice, easing matters for them,” Dhakal said.
According to a DoI official, the stalling of visa processing had hampered more than half a dozen multinational and joint venture companies, such as NCell and Unilever Nepal, in getting due renewal of work permits for their foreign staff over the last two months.
“We will now process their applications with top priority,” he stated

Prof Yunus lays emphasis on social biz to transform people's lives

Nobel laureate and champion of micro-finance Professor Muhammad Yunus on Friday recommended the Nepali business community and people in general to pursue social business -- a non-loss, non-dividend company designed -- to address the social needs and objectives, as government has little capacity to solve people´s problems by itself.
"And its importance in country like Nepal, which has far more difficult terrain and remote areas, needs no more explanation. People in remote areas simply cannot be served from outside. Only way to sustainably serve them is to let the people there serve themselves," said Professor Yunus.
Addressing a cozy gathering of people from different walks of lives in the capital on Friday, Yunus cited microfinance as a vital instrument to conduct social business that aim to improve livelihood of the poor.
"We need microfinance institutions (MFIs) in order to transform the lives of poor people in the world. And there is no country in the world where MFIs don´t exist," Yunus shared his almost four decades of experience in the microfinance sector in an almost 45 minutes long lecture.
"Making money is happiness, making other people happy brings super happiness," Yunus said, encouraging the Nepali corporate houses to set up social businesses in order to serve the people and society at large. Prime Minister Baburam Bhattarai, Governor of Nepal Rastra Bank (NRB) Dr Yuba Raj Khatiwada and leaders of the finance and business sectors were present.
Professor Yunus who started Grameen Bank in Bangladesh in the mid-1970s aiming to help the poor people to uplift their lives by enabling them access the finance, said eloquently, "micro-credit is a means that over the years has helped millions of people worldover to unleash their capacity."
He also made a very clear remark on difference between big banks and small MFIs. "There are big buildings of banks in the urban areas with huge amount of money. But still billions of people across the world are deprived of financial services. This is where micro-finance come into play," Yunus said.
Yunus further highlighted the importance of ensuring poor people have access to finance, saying it opens wide range of opportunities for them, unleashing their creative entrepreneural skills. Sadly, however, he noted, the rigid rules and poorly architected financial system has largely left the people deprived form getting hold of those opportunities.
"There is a straight connection between poverty reduction, employment generation and microfinance," Yunus said. "People shouldn´t be the victim of the poor system; rather the system that does not serve larger mass should be changed."
"Our aim is to relieve poor people from unbearable sufferings. We have to believe in the people and their potentialities," he said. "We in the Grameen Bank did exactly that in Bangladesh. We have been doing it since the last 4 decades."
Yunus who received Nobel Peace Prize in 2006 for his contribution through Grammen Bank urged all to replace the charity by social business. "Charity money has just one life. But if we invest in social business, it generates other lives and propogates further," he said with a mellowed tone.

Enforce competition law: Experts

Experts and officials from the South Asia region have stressed the need for strong enforcement of competition laws in order to keep prices of goods low and relieve consumers from the illegal activities of the traders and retailers.
Addressing the concluding day of the two-day regional workshop in the capital on Friday, former commerce secretary Purushottam Ojha said there is a need to closely monitor the market and keep traders and retailers under surveillance and support consumers.
More than 50 experts from Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka participated in the workshop organized by South Asia Watch on Trade, Economics and Environment (SAWTEE).
"Nepal introduced Competition Act in 2007, but it has become very difficult to enforce it," Advocate Apurba Khatiwada, an expert on competition law, said. "The Competition Act of Nepal itself is flawed. Retailers collective monopoly is legal under this act."
Experts have urged all the governments in the region to strongly punish those who break competition laws. The workshop also covered issues such as regional cooperation, climate change, agriculture sector and trade of agri products.

Govt silent on security for major projects

The government´s more than half a dozen decisions related to three mega hydropower projects, Upper Karnali (900 MW), Upper Marsyangdi (600 MW) and Arun III (900 MW) are not significantly meaningful to ensure that the projects will be initiated on time, experts claimed.
"The government has failed to address major issue of project security which the developers are long seeking to ensure project development on time," Gyanendra Lal Pradhan, hydropower expert said.
The government on Tuesady decided to allow increase of capital from Rs 450 million to Rs 1.9 billion for GMR Upper Karnali Hydropower Company Limited and Himtal Hydropower Company Limited -- two subsidiaries of Indian infrastructure developer GMR entrusted to develop Upper Karnali and Upper Marsyangdi respectively and to extend their offices in New Delhi, India.
Other decisions included allowing Sutlej Nepal to establish office in India and allow the company to bring another equity shareholder for the project development, extend the survey license of Upper Karnali for another six months, allowing GMR to start land acquisition verification in the project site of Upper Marsyangdi.
Pradhan argued that the government´s decisions were purely procedural and did not guarantee the development of the projects. "There is nothing to be happy from the government´s decisions on Tuesday," he added.
"Government´s decisions give a positive meaning but they are not landmark steps towards ensuring the project development in the country," Krishna Prasad Dulal, another hydro expert and former board member of the Nepal Electricity Authority (NEA) said.
Dulal added that the Nepal Investment Board (NIB) itself is not heading in the right direction. "The NIB had to show a strong gesture to send the message that the government was concerned about the security issues that the developers are raising time and again," Dulal said.
GMR, a leading Indian insfrastructure developer that is engaged in the two mega hydropower projects of Nepal, had formally written to the government seeking security in the project sites after the CPN-Maoist -- a breakaway faction of ruling UCPN (Maoist) -- decided to ´struggle´ against the Indian developers in Nepal.
"The government has skipped a major concern of the developers," an official of the NEA said in condition of anonymity since speaking on those projects doesn´t fall under the jurisdiction of NEA. "At least, the government had to come up with some strategies such as taking locals into confidence and issuing share to the locals in order to protect projects from the anti-project forces," the official opined.
In the meantime, CPN-Maoist has said that the party is totally against the government´s decisions and will soon announce protest programs after completion of the party´s general convention in January. "We are against the projects and will use all forces to protect people´s right and save national resources from Indian encroachment," Pampha Bhusal, spokesperson of the CPN-Maiost told Republica over phone on Wednesday.
Radesh Pant, chief executive officer (CEO) of the NIB said that the NIB board of directors meeting on Tuesday chaired by Prime Minister Babu Ram Bhattarai was silent on security issues of the project. "The meeting was more focused on administrative issues," Pant said.
NIB, a high level government entity to carry out the mega projects, is looking after the hydropower projects above 500 MW including Upper Karnali, Upper Marsyangdi, Arun III and West Seti (750 MW).

Govt to declare Shree Nepal Boarders, Birat Leather as sick industries

The government is set to declare Shree Nepal Boarders and Birat Leather as sick industries - a label which will pave way for the two to enjoy slew of incentives and special treatment from the state.
"A technical committee, formed to carry out required study prior to declaring any firm sick, has recommended labeling the two companies as sick," a high-level government official at the Ministry of Industry (MoI) told Republica.
This suggestion will soon be forwarded to the cabinet for final approval, according to the official. "Once the cabinet extends green signal, the firms will be entitled to special treatment from the government, which will provide impetus for their revival," added the official, preferring anonymity as he is not authorized to talk to media.
Of the two companies in line to be named sick, Shree Nepal Borders, a Bara-based firm, has accumulated loss of Rs 480.9 million as of fiscal year 2010/11.
To resurrect itself, the company has requested for more than a dozen incentives from the government, documents obtained by Republica show. These include easy access to loan, smooth power supply, availability of raw materials from Sagarnath Forest Development Project, three years of moratorium for loan payment and one year for interest payment, credit at six percent interest rate and availability of Rs 70 million in loans.
"The incentives and facilities will be provided as per the provisions in the Industrial Act 1992," the official said.
Birat Leather, another firm likely to be declared sick, also has its list of request, including permission to sell fixed assets.
The firm, established in 1981 under the name of Hetauda Leather Industry, then a state-owned enterprise, was renamed to Birat Leather after it was privatized in 1996. It has remained closed since June 2008 as per the court decision.
"The company has requested the government to grant it permission to sell its property to be able to pay back the loan," reads the document submitted to the MoI. "The company has also requested for loan restructuring."
The current initiative taken by the government to revive ´sick industries´ is based on a report prepared by a high level committee under the leadership of Dipendra Bahadur Kshetry, vice chairperson of the National Planning Commission.
However, the MoI, entrusted with the task of implementing recommendations of the report -- formally approved by the cabinet around a year ago -- has argued that the government can´t extend incentives outlined in the report as they are not in line with the existing Industrial Act.
"The companies will get certain facilities as per existing laws after declaring them sick," the MoI official said.

Govt okays capital increase for GMR subsidiaries

The government on Tuesday took more than half a dozen decisions related to hydropower, including allowing GMR Upper Karnali Hydropower Company Limited and Himtal Hydropower Comapny -- subsidiaries of Indian power developer GMR-- to increase their capital and set up offices in New Delhi, India.
Nepal Investment Board (NIB), a high-level government entity chaired by Prime Minister Dr Baburam Bhattarai, met Tuesday morning and decided to renew the survey license for GMR for its Upper Karnali project (900 MW) for another six months.
The government had first granted a survey license to GMR for the Upper Karnali in May 2008. "GMR had sought a one-year extension of the survey license," a high-level government official said. "But the existing law bars that."
Likewise, the meeting has allowed GMR Upper Karnali Hydropower Limited and Himtal Hydropower Limited to established in Nepal to develop the Upper Karnali and Upper Marsyangdi (600 MW) respectively and increase their authorized and issue capital from Rs 450 million to Rs 1.9 billion for each company.
The companies had sought government approval to increase their capital investment after they increased their project capacity.
According to information compiled at the Department of Energy Development (DoED), the capacity of Upper Karnali has increased from 300 to 900 MW and that of Upper Marsyangdi from 250 MW to 600 MW.
"The meeting decided to allow them to increase their capital to cover the increased capacity of the projects," the official told Republica.
IBN, at its meeting scheduled after a long time, has decided to allow Sutlej Jal Vidyut, a state owned Indian power producer, to bring in new equity shareholders and extend the time for doing so. Sutlej, which is developing the Arun III (900 MW) hydropower project, has been seeking new equity shareholders to develop the project.
According to the government official, Sutlej and GMR had both sought approval to establish offices in Delhi to work on marketing their hydropower once they come on stream. Both companies, which are engaged in the generation of a total of 2400 MW in Nepal, have targeted the Indian market for their future power output.
Additionally, the government has granted Himtal Hydropower Limited permission to start land acquisition verification (LAV) at the project site for Upper Marsyangdi in Lamjung and Manang districts.
"The company had requested permission to conduct LAV at the project site and this was granted," the official said.
Meanwhile, the government recently approved the environment impact assessment (EIA) report for the Upper Marsyangdi project prepared by GMR.
The government has awarded three mega hydropower projects -- Upper Karnali and Upper Marsyangdi to GMR and Arun III to Sutlej -- under the build-own-operate-transfer (BOOT) scheme.

NIB makes contradictory statements on PDA template

Nepal Investment Board (NIB), a high-level government agency formed to facilitate investment in mega projects, has made contradictory statements on the template of Power Development Agreement (PDA) for hydro projects with capacity above 500 MW.
Issuing a statement, the board, on June 14, said the government had endorsed the template of PDA for hydropower projects above 500 MW. Making a U-turn in its previous statement, the board has now notified the National Information Commission (NIC) that no such template has been approved.
The board´s recent statement came after NIC inquired it about the status of the PDA template. The NIC approached the board after it received a complaint from an NGO, seeking details of the template.
"The meeting of the Nepal Investment Board of Directors on June 14 has approved the new PDA template for hydropower projects above 500 MW,” NIB had said in the statement.
The board had also said that the template would be applicable for four mega hydropower projects -- Tamakoshi III (650 MW), Upper Karnali (900 MW), Upper Marsyangdi (600 MW) and Arun III (900 MW).
Now, the board officials say the PDA template is yet to be finalized and that preliminary discussions on it were underway.
Advocate Apurba Khatiwada, an executive member of Law Student Society, had filed the complaint, demanding full text of the template, under the Right to Information Act.
“I approached the NIC after the board turned down my request saying that negotiations with power developers will be affected if the template is made public," Khatiwada said.
The board officials have now admitted that the PDA template is still under discussion.
"The PDA template is yet to be finalized; we are having discussions with stakeholders in order to finalize it," Radesh Pant, CEO of NIB, told Republica on Sunday.

3 firms short-listed for Fast Track

The government has short-listed three firms for the construction of much touted Kathmandu-Terai Fast Track Project. A total of nine different firms had bought expression of interest (EoI) in a bid to win the project.
"Reliance Infrastructure, Larsen & Toubro (L&T) and Infrastructure Leasing & Financial Services (IL&FS) have been short listed for construction of the Fast Track Project," Tulsi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) told Republica on Friday. All the short-listed firms are India´s leading infrastructure development company.
According to Sitaula, the government has sought request for proposal (RFP) from three short-listed contractors this week. "We will choose one contractor from among the short-listed companies on the basis of detailed proposal they submit to the government," Sitaula said.
A total of nine contactors including Nepali, South Korean and Indian firms had bought EoI to develop the much touted Fast Track Project that connects Kathmandu and Terai through 76 km long road stretch. "However, only four of them submitted the proposal to the government," Sitaula said. "Another Indian construction company Gomman India was not selected."
The other contractors that bought EoI for the construction of the project were Samsung Kalika Consortium -- a consortium of Korean company Samsung Engineering and Kalika Construction, a domestic company --, Landmark Worldwide (LMW), Srei Infrastructure Finance and a domestic construction company Sonakshi Infrastructure Development.
"The companies have been selected on the basis of their previous experience working under the built-own-operate-transfer (BOOT) and other capabilities such as capital and their past history of completing work in time," Sitaula said.
The government has decided to develop the Fast Track Project under the BOOT. "We will have a rigorous study of the detailed proposal of the short-listed companies once they submit to us," Sitaula further added.
The government, after a long push to acquire land in the Khokana area of Kathmandu for Fast Track Project, has decided to reduce the width of the road.
"We realized that acquiring land in the Khokana area is too difficult," Sitaula said. "Finally, we made a decision to reduce the width of road as much as possible to make land acquisition easier."
As of now, the government has almost completed the task of land acquisition. "The land acquisition process has been done," Sitaula said. "We have to speed up the process of track opening." According to Sitaula, almost 70 percent track opening has been completed as of December first week.

111 MW Rasuwagadhi, 15 MW Hewakhola A get generation licenses

The government has approved power generation license for 111 MW Rasuwagadhi Hydropower and 15 MW Hewa Khola-A Hydropower Project this week after they completed their financial closure.
"The power generation licenses for the two projects have been approved," Gokarna Raj Pantha, senior division engineer at the Department of Electricity Development (DoED) told Republica.
Rasuwagadhi Hydropower Company Limited (RGHPCL) -- a subsidiary of Chilime Hydropower Company Limited (CHPCL), which is developing Rasuwagadhi hydropower project, and the government have also inked power purchase agreement (PPA).
According to the PPA, Nepal Electricity Authority, state owned sole hydropower regulatory authority, has agreed to buy the power generated by Rasuwagadhi.
Likewise, the government and the Panchthar Power Company Limited (PPCL), which is developing Hewa Khola-A, have already signed PPA for 12 MW of the 15 MW that PPCL generates. "We have awarded generation license to PPCL on condition that PPA for the remaining 3 MW will be signed within one year," Pantha said.
Hewakhola-A is located in Panchthar district. PPCL has already completed its financial closure.
Rasuwagadhi is a run-of-the-river project with 51 percent promoter shares and 49 percent of public shares. The project has offered 10 percent shares to the locals of the project area. Fifty percent of the project capital has been arranged through loan from the Employees Provident Fund (EPF).
The project is to be completed by 2016. A 90-meter test tunnel has already been dug.
According to the information available at the website of the promoter, a tri-partite loan agreement between RGHPCL, CHCPL and Employees Provident Fund (EPF) was signed in December 2011.
"The company has planned to start construction work from January 2013," the company´s website says. At present land is being acquisitioned in Thuman and Timeri VDCs of Rasuwa district for the project.
The company has plans to connect the power generated from the project by a 10-km 132 kV transmission line up to Chilime Hub. "We are hopeful that the project will be completed on time," Pantha added. "Otherwise the cost of construction increases which will be a burden for all those involved."

GMR seeks to inject Rs 1.45b more in Upper Marsyangdi

GMR, the Indian power developer, has sought approval for injecting additional Rs 1.45 billion investment into the 600-MW Upper Marsyangdi Project after the government okayed the environmental impact assessment (EIA) report of the project prepared by the company.
"The Ministry of Environment, Science and Technology (MoEST) has approved the EIA report of the project on Monday and has forwarded it to the Investment Board of Nepal (IBN)," said a source close to the Office of the Prime Minister and Council of Ministers (OPMCM).
According to the source, GMR has sought approval from the government to bring in new investment worth Rs 1.45 billion for Upper Marsyangdi. GMR has earlier injected Rs 450 million into the project.
The company will get generation license of the project from the government only after it discloses financial closure of the project cost. The additional investment that the company is preparing to inject has no connection with the project´s financial closure.
Confirming the development, Keshav Bhattarai, secretary at MoEST, said the EIA report of Upper Marsyangdi has been approved. "We have forwarded it to the concerned agency for further execution," Bhattarai told Republica.
IBN, a high-level body of the government entrusted to carry out mega projects including hydropower projects of above 500 MW, will soon inform GMR about the development.
A source privy to the issue informed Republica that the IBN secretariat will take a decision on GMR´s application. "The board meeting has been scheduled for next week. The meeting will take a decision on approving the additional investment and other related issues," the source said.
Moreover, GMR, which is also developing the 900-MW Upper Karnali -- another of Nepal´s largest hydropower projects -- has applied for approval from the government to establish a new office in Delhi, India to manage its market for future power supply. GMR has targeted the Indian market to sell its power generated from the two projects -- Upper Marsyangdi and Upper Karnali.
"The scheduled board meeting of IBN will take a decision on it as well," the source further revealed.
The government has given the Upper Marsyangdi Project to GMR under build-own-operate-transfer (BOOT) act. GMR has been commissioned to complete the project by 2016.
Construction of the run-of-the-river project located in Lamjung and Manang districts will begin after the company discloses its financial closure successfully.
GMR, which has been frequently threatened by the CPN-Maoist, has asked for adequate security at the project sites from the government.

Govt likely to increase capacity of Trishuli 3 'A'

The government is mulling over taking a decision to increase the capacity of Trishuli 3 ´A´ from 60 to 90 MW through the cabinet bypassing the Nepal Electricity Authority (NEA) board after some of its board members strongly objected the idea, a source privy to the issue said.
Though Prime Minister Baburam Bhattarai last week assured the opposition leaders he would decide on the issue only with their consensus, officials said the government had instructed the NEA to move ahead with the proposal.
“However, NEA could not move the proposal ahead as some of its board members strongly objected,” said the source. “Following resistance, the Ministry of Energy (MoE) is now preparing to directly forward the proposal to the cabinet to get its approval,” he told Republica.
Concerned MoE officials expressed their ignorance on such a move. “No decision so far has been made to submit a proposal to the cabinet to upgrade Trishuli 3 ´A´,” said Energy Secretary Hari Ram Koirala.
“But we may do that in the future. It is still undecided so I cannot say anything now," Koirala told Republica over the phone.
He added that upgrading Trishuli 3 ´A´ was in national interest and the government should move the plan ahead. "Upgrading Trishuli 3 ´A´ will help us utilize resources optimally," Koirala said.
Rameshwore Yadav, managing director of NEA agreed with Koirala.
“Trishuli 3 ´A´ upgrading plan was politicized for no good reason,” said Yadav. "Now that it has been politicized, NEA is not in a position to take any decision in this regard," he added.
Chief Secretary Lila Mani Poudyal, who was recently appointed the Chair of the NEA board, did not make much comment on the issue.
"If Ministry of Energy (MoE) wishes to decide on the case of Trishuli 3 ´A´ it will need to submit an agenda to the cabinet. That has not been done so far. I can´t tell you now what it will do in the future," Poudyal said.
The government has been building 60 MW Trishuli 3 ´A´ with US$ 89 million soft loans from Exim Bank of China. It recently stood in favor of upgrading the project after the Chinese contractor -- China Gezhouba Group Co - informed NEA that it can upgrade the project to 90 MW if the government spent US$ 132 million in total.
But the move drew instant criticism from the opposition leaders, former Energy and Finance Ministers, and also some of the NEA board members. They opposed the idea of pumping in additional loans in the project mainly because Trishuli 3 ´A´ can operate in full capacity only in rainy season.
"Increasing its capacity will be meaningless because in dry season, when we need most of the power, it will be operating at lowest capacity,” Krishna Prasad Dulal, former NEA board member said.
Two NEA board members, namely Bishwa Prakash Gautam and Mohan Raj Pant too were strongly against the upgradation of Trishuli 3 ´A´, according to the source. Tek Nath Acharya, another NEA board member is in its favor.
Finance Secretary Shanta Raj Subedi, who is also a board member of NEA, stands in favor of whatever the government thinks is appropriate. Dambar Bahadur Nepali, another newly appointed board member, however, has not openely expressed his opinion on the issue.

Investment commitments up by 75%

Even as the country´s political situation and investment climate remain dismal, Department of Industry (DoI) says new investment commitments from the domestic as well as foreign investors has gone up by a whopping 75 percent over the first four months 2012/13 compared to the same period last year.
Statistics compiled by DoI show, a total of 156 firms made fresh investment commitment of Rs 26.56 billion in the first four months of this fiscal year, whereas it was just over Rs 15 billion in the same period last year.
If those entrepreneurs kept their commitment and injected fresh capital, they would collectively create fresh job opportunities for 10,167 persons.
With 38 new projects registered under the hospitality industry with DoI, tourism sector has evolved as the most popular sector. However, in monetary terms, energy sector was the single biggest sector to draw biggest investment commitment.
Investors registered 22 projects on energy sector during the period, committing investment of about Rs 15.46 billion, DoI director Ram Sharan Chimoria told Republica. DoI data show, investment commitment to the sector has doubled compared to the figures last year.
"In fact, investment commitment to the sector is more than the total investment made in the country last year," Chimoria told Republica.
Investment commitment to the energy sector made around 58 percent of total investment commitment that DoI registered during the first four months of the current fiscal year.
Despite the power crisis, labor problems and lack of policy support, manufacturing sector stood as the second largest puller of domestic as well as foreign investment.
"Investors have registered 35 manufacturing projects during the first four months, and our data show together they will be investing Rs 5.83 billion, creating jobs for more than 4,250 persons," said Chimoria.
In monetary terms, investors in the first four months this fiscal year have committed to invest Rs 2.73 billion on tourism sector and Rs 1.73 billion in the service sector.
As usual, agro-based industry, despite its huge potential, drew a meager investment commitment of Rs 425 million.
However, DoI that compiles the data of industrial investment couldn´t provide breakdown of domestic and foreign direct investment.
"We could not do that because we have not been able to update statistics of domestic and foreign investment commitments separately. As soon we install new software, we will maintain a separate data on domestic and foreign investment," Chimoria stated.

10 hours of daily power cuts from Saturday

Amid the government´s announcement to limit load shedding hours just to 12 hours a day this winter, the Nepal Electricity Authority (NEA) has increased load shedding to 10 hours per day effective from Saturday.
NEA released a new schedule of load shedding on Friday increasing daily power cuts from the existing eight hours to 10 hours a day citing decreased water levels in the rivers.
NEA officials projected longer load-shedding hours against the 12-hours per day announced by the government. "I don´t think it will be possible to limit load shedding to 12 hours per day since no additional power has been added to the national grid," a highly placed NEA official said on condition of anonymity.
The official further added load-shedding would soon cross 12 hours per day. "There is no way the government can limit load-shedding to 12 hours per day," added the official.
Meanwhile, Bishwa Prakash Gautam, member of the NEA board informed that the Kulekhani reservoir has not been used so far. "Kulekhani might help reduce load-shedding hours this winter," said Gautam.
The new schedule further states that there might be 11 hours of load shedding per day if the situation worsens.

Kalika Construction bags FCAN's Class 'A' Gold Award

Kalika Construction has been named the best class ´A´ construction company of the country for the Nepali year 2069. The Class ´A´ FCAN Excellence Gold Award-2069 was handed over to the company by Minister for Physical Planning, Works and Transport Management (MoPPWTM) Hridyaesh Tripathi, amidst a function held by the Federation of Contractors´ Association of Nepal (FCAN) in Kathmandu on Friday.
During the Jagdamba Steels-FCAN Excellence Award ceremony, which coincided with the 5th National Construction Day, Sharma & Company and Nepal Adrasha Nirman bagged ´A´ FCAN Excellence Silver and Bronze awards, respectively.
Similarly, Class ´B´ FCAN Excellence gold, silver and bronze awards went to Ashrya Nirman Sewa, Gajurmukhi Nirman and Roshan Construction, respectively. Among class ´C´ construction companies, J.B. NJirman Sewa, Sundar Nirman Sewa and Ratnakali Nirman Sewa bagged Class ´C´ FCAN excellence gold, silver and bronze awards, respectively.
The awards are given away based on performance of construction companies during the year.
On the occasion, the FCAN also provided awards to New Suraj Nirman Sewa, Indereni Nirman Sewa, Mana-Gomati Joint Venture, KC Nirman Sewa of Manang and Nepal Consult for their contribution.
Addressing the award distribution ceremony, Jayaram Lamichhane, president of FCAN, said there should be a favorable political situation in the country to make the domestic construction sector more efficient.
"More than 14,000 small contractors are not going to get any job during the fiscal year 2012/13 due to lack of full-fledged budget," Lamichhane said, expressing dissatisfaction over the current political wrangling and its severe effect on the construction sector.
Urging all the political parties to give a way out to the current deadlock, Lamichhane said that the country should be serious about the development of construction sector for economic prosperity. "Every government talks about economic prosperity but we don´t find them serious about the country´s construction sector," he said on the occasion.
Emphasizing on the government´s role to make contractors more efficient, contractors said that there were many opportunities within and outside the country. "We just need a supportive bureaucracy and policies to work constantly," Bishnu Bhai Shrestha, vice president of FCAN, said.
Bikram Pandey, chairman of the ´A´ Class Excellence Gold Award winner Kalika Construction, said the government was not supportive to uplift the quality of the contractors in the country.
"The government imposes unnecessary criteria in bidding process to avoid participation of domestic contractors," Pandey said. "We don´t get an opportunity to work here due to government´s ill intention."

Property loss to road widening is double govt expenditure

People have lost twice as much in property as the government´s total expenditure on widening and smoothening roads in Kathmandu Valley.
Government estimates show that it would cost Rs 5 billion to expand the 122 road stretches covered by the widening program while people whose property had to be demolished have lost around Rs 10 billion.
"People have lost around Rs 10 billion during this entire process of road widening," Krishna Hari Baskota, secretary at the Office of Prime Minister and Council of Ministers (OPMCM), told Republica.
According to Baskota, more than 1,000 houses have been affected on the 200 km of road widened. "Our rough calculation is that people have lost more than the government´s total investment in the road expansion," he said.
He further said it was a different matter that people had built their houses without conforming to laws and regulations, "but loss is loss".
Bhai Kaji Tiwari, chief of Kathmandu Valley Town Development Authority (KVTDA), also echoed Baskota. "Yes, the rough calculation is that people have lost a huge amount pulling down their premises and renovating them," Tiwari said.
Baskota, who has been on field inspection several times to speed up the road widening, said that the figure on loss for people emerged from his interactions with engineers and people whose houses have been affected by the road widening. "I think we should also recognize what people have lost in the course of this process but I find people mostly supportive of the government´s program," Baskota said.
The government has released Rs 6 million to KVTDA to distribute to households that have lost their entire property during the road expansion. "The Ministry of Finance (MoF) released Rs 6 million a few weeks back to distribute to 10 households in the Lazimpat-Maharajgunj section that have lost everything to the road widening drive," Baskota disclosed.
The government doesn´t have a budget for road expansion as such but OPMCM has directed MoF to arrange the required amount in order to complete the work in time.
"The government is confident the road widening program will not be short of funds," Baskota said. "MoF is managing the budget through transfers from other heads."
According to Baskota, the government has already allocated Rs 1 billion for the road widening. "An additional Rs 4 billion will be arranged without delay to complete the work on time," he said.

No Trishuli 3 'A' expansion without your consensus: PM to ex-ministers

Following criticism from former ministers and opposition leaders, Prime Minister Baburam Bhattarai has assured them that he will not take any decision relating to the 60 MW Trishuli 3 ´A´ hydropower project without the formers´ consensus.
"The PM told us at a meeting on Tuesday that he would not take any decision relating to Trishuli 3 ´A´," former energy minister and CPN-UML leader Gokarna Bista told Republica. "We briefed him on the loss the country would face if a decision was taken to increase the capacity of the project from 60 to 90 MW."
Former ministers including Dr Prakash Sharan Mahat, Surendra Pandey, Gokarna Bista, Pradeep Nepal and Dr Prakash Chandra Lohani held a meeting on Tuesday and intensified their meetings with top party leaders to create pressure on the government not to take any decision towards increasing the project capacity.
The government has taken a loan of USD 89 million from the Chinese Exim Bank for work on the project, which is being developed by Chinese contractor China Gezhouba Group Co.
The government is mulling increasing the project capacity, adding another USD 43 million to the cost.
"There is no point increasing the capacity since that is not going to help us to generate power in the dry season," Krishna Prasad Dulal, a hydro expert who was sacked from membership of the Nepal Electricity Authority (NEA) board on Monday after he resisted moves to increase capacity at Trishuli 3 ´A´.
"I don´t see any benefit to the country in increasing the capacity; rather, it will be a loss," Dulal said.
According to him, an NEA study shows that the project can be developed at just USD 111 million even if the target is 90 MW.
Additionally, at the time of signing the contract, the Chinese contractor had agreed to develop 90 MW at just USD 111 million, according to Dr Mahat. "We can sense irregularities and chances of misuse of national resources in this whole process," he said.
"We have been visiting Pushpa Kamal Dahal, Sushil Koirala and Jhala Nath Khanal to urge them to pressure the government not to increase capacity at Trishuli 3 ´A´," Bista said.
"Meanwhile, the PM, who was also present at the three-party meeting to settle the current political deadlock, assured us that he wouldn´t take any decision without consulting the former finance and energy ministers."
The former ministers had held a meeting following a report a couple of weeks back that the government was taking steps to increase the project capacity. "Taking a decision involving millions of dollars at a time when there is no parliament or parliamentary committees to check executive branch decisions is not acceptable to us," Dr Mahat said. "The government´s moves towards increasing the project capacity are unreasonable."
"There is no point increasing the capacity since it will just delay the project implementation and the country will suffer a tarrif loss of Rs 4 billion due to the delay," Dr Mahat said.
Sources close to the Office of the Prime Minister and Council of Minister (OPMCM) disclosed that the government was working constantly on increasing the capacity of the project. "The decision to appoint Chief Secretary Lila Mani Poudyal as chairman of the board at NEA is a part of government strategy to increasing capacity," a high-level official at OPMCM said on condition of anonymity.
Coincidently, the government decided to appoint Poudyal as chair of the NEA board on Tuesday evening after Bhattarai gave word to the former ministers not to move ahead without consulting them.
"I think the government is moving ahead with a decision to increase the capacity," the source said. "The PM decided to appoint Poudyal as board chair after Energy Secretary Hari Ram Koirala proved unable to manage the intricacies of a decision to increase the capacity of the project.

Agitating industrialists withdraw protest

Agitating industrialists that have their firms inside the country´s 11 industrial estates have withdrawn their protest programs after the government decided to defer the enforcement of recently announced hike in rental fees and invited them for talks.
The industrialists had decided to launch protests against the decision of Industrial Estates Management Limited (IEML) after it raised rental fee of land and buildings inside the estates by 850 to 1,400 percent. Federation of Industries in Nepal Industrial Estates (FINIE) that spearheaded the protest said the IMEL´s decision was unfair.
"But we have withdrawn our protest programs after IEML assured us the new fee structure will not be enforced for the time being and committed to revise the fee through mutual consultation," Shailendra Lal Pradhan, president of FINIE told Republica.
"We will soon form a committee to hold negotiation meetings with the IMEL officials for fixing the new rental fees," said Pradhan.
Meanwhile, Federation of Nepalese Chambers of Commerce and Industries (FNCCI) issuing a press release on Tuesday expressed solidarity with FINIE´s stance. "We are with FINIE. The government´s decision to hike rental fee in the industrial estates without due consultation with the concerned entrepreneurs is not acceptable to us," FNCCI said in the release.
The 11 estates spread in different parts of the country houses more than 600 firms inside their premises. Together, they have over Rs 13 billion of private investment and employ 11,109 people.
The industrial estates were set up with a view to uplift the country´s industrial sector by making efficient use of available resources and extend better services and facilities to factories.
Additionally, the government is also mulling a change in the management system in order to make industries based in the estates more effective. The change is being worked out after FINIE repeatedly lodged complaints against IMEL´s weak performance to utilize the resources available in the estates.
Industrial estates cover over 5,128 ropanis of land in different places such as Balaju, Patan, Hetauda, Dhanusha, Nepalgunj, Pokhara, Butwal, Bhaktapur, Biratnagar, Dhankuta and Saptari.

MRP not against the spirit of free market economy: PM

Prime Minister Babu Ram Bhattarai on Friday said the government´s step to fix maximum retail price (MRP) for essential goods was not against the spirit of open economy, but at making consumers aware about what their prices should be in the market.
"Fixing of MRP was not against the principle of open economy," Bhattarai said. "The government was just fulfilling its responsibility by making consumers aware about the existing price level in the market of major essential goods."
Addressing the 15th anniversary of Society of Economic Journalist of Nepal (SEJON) on Friday, PM said that the private sector should not be worried by the step that the government took to ease lives of consumers, who have been reeling under haphazard price hikes.
"Besides, the MRPs were set in consultation and by winning the confidence of the private sector," he said.
The government had fixed MRP of essential goods such as rice, oil, lentils and others a couple of months ago. However, the step drew strong criticism from the private sector bodies like Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and economists.
Despite the announcement of MRPs, the government has failed to get them enforced, as consumers complain retailers were still continuing to charge them prices higher than the MRPs.
Similarly, Bhattarai has said that the country´s economy wouldn´t see any actual growth without a potential inflow of foreign direct investment (FDI) in mega projects and infrastructure development.
"We need more than Rs 600 to 700 billion of capital expenditure in each fiscal year in order to achieve real growth of economy," Bhattarai said. "We need inflow of FDI from different countries to inject such a huge amount of investment in the economy."
Highlighting the government´s endeavor to lure FDI, PM Bhattarai said that the government was working to create a favorable environment for new investment.
"The government is seriously working on settling the labor issues, central bank is trying to address the issues of interest rate and most importantly we have been amending slew of policies in order to create an enthusiastic environment for domestic as well as foreign investors," PM said.

Nepa Construction Expo starts Friday

Nepa construction Expo 2012 is set to kick off from Friday at Bhrikutimandap, Kathmandu, during which more than 3 dozen construction materials producers, construction equipment distributors and others will showcase their goods and services.
The expo lasting for five days will have more than 70 stalls where visitors will get latest information on products including cement, steel rod, plumbing materials, water treatment plant, swimming pool equipment and construction chemicals among other things.
The expo targets to cater to the needs of ordinary people, contractors and urban development planners. The organizer has estimated that more than 35,000 people will be visit the event.
In a bid to lure visitors, the exhibitors at the expo have announced special discounts on numerous products.
Major highlights of the expo
Premium cement of Narayani
Narayani Cement Industry that has been producing Trishakti and Bajrashakti brands of cement has announced that it will showcase all its premium brands at the expo. "We are showcasing Trishakti Premium OPC, Trishakti Super Premium OPC and Bajrashakti PPC cement during the expo," said Suraj Kumar Dahal, marketing manager of the company. Indian Birla cement will also be exhibited.
While the objective of the company at the expo is to inform the visitors about its premium products, it has also invited SN Banerjee, an expert on cement quality as a resource person for the workshop that will be held during the expo. Narayani Cement relies on clinker imported from India for manufacturing. The company produces around 1,200 tons of cement per day.
New pipes and fittings from Inter Tech
InterTech Pipes and Fittings is going to showcase its new products. Its major offer during the expo will be products ranging from PPR to HDI PPR to PVC pipes, said Binit Agrawal, director of the company. "All these products have received Nepal Standard (NS) mark," said Agrawal.
InterTech has been producing pipes and fittings for the last five years. It also plans to launch new products such as iron steel fabrication and galvanized products during the expo. "These products are useful to construct suspension bridges," Agrawal said.
Special discount on Force materials
Force Construction and Associates, which is exhibiting construction equipment of four different companies has announced that it will also be providing heavy discounts to customers at the expo. The company is showcasing heavy equipment manufactured by Case, Universal, Putzmeister and Techmark.
The company is also unveiling office system of Techmark and large size racks at the exhibition. The racks will be useful keep construction equipment. Force Construction and Associates has also announced free tour package to Thailand and Malaysia to the customers paying 10 percent advance amount for the purchase of backhoe loaders and compacters. Along with these four companies, Force also sells equipment of Komatsu, L&T, Ashoka and CopperCorp, among others. Force has also introduced eco-friendly ´Ecopack´ in the Nepali market.
Asian Paints focuses on branding
Asian Paints, the official paints partner of the expo, said that it aims to use the expo to promote its two paint products -- Royal Play and Aultima Metallic Paints. Asian Paints also will allow opportunity to the visitors to learn how to paint their home. "Visitors will be able paint themselves during the expo," said Banjade.
"The objective behind making such arrangement is to give opportunity to consumers to see for themselves the quality of paint," said Shankar Banjade, marketing executive of the company.
Workshop to disseminate knowledge
The expo will also be a platform for those who want to learn about construction and construction materials. Exhibitors hope the workshop entitled ´Enhanced Construction Environment for Better Tomorrow´ to be conducted during the expo period will be useful to make consumers more aware about modern construction materials and technology.
The workshop that will be held at Trade Tower on Sunday will be addressed by experts from Nepal and India. A total of 11 papers will be presented at the workshop including one by Tulasi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM).

Contractors seek raise in overhead cost by 10%

The cost of executing the development projects could go up by 10 percentage point, if the contractors working across the country get their 15-point declaration implemented.
Federation of Contractors Association of Nepal (FCAN), which unveiled a 15-point declaration at the end of its two-day 15th General Convention in Bhairahawa on Monday, said it will ask the government to raise contractor´s overhead cost to 25 percent from existing 15 percent. The Convention even entrusted its executive body to push the government to get this raise.
“The raise is necessary as prolonged political transition has rendered timely execution of development works extremely difficult, and the cost of labor too has gone up sharply,” FNCAN said in the declaration, which it has vowed to translate into action soon.
The convention also decided to ask the government to incorporate a categorical provision on variation in all tender documents, arguing that such inclusion would end long-running problems of claims and counterclaims that contractors face while receiving payment in case of project over-run.
The convention also entrusted the FCAN to take initiatives for enactment of new policies and rules to protect their rights and promote contractors. There are more than 15,000 contractors of varying size operating across the country.
Though there exists a policy and law to guide the construction works, contractors said the state has simply not recognized the people that execute the development works.
The contractors also expressed concerns over growing unprofessional interference in their works by authority and diverse groups and urged the FCAN office bearers to take steps to end such a situation. “Such unprofessional behaviors have created problems for us to carry out our works smoothly,” the declaration read.
The convention also asked the FCAN to negotiate with the government to reduce the volume of works that can be executed through the local consumer committees. The declaration has also requested the government to allow them to locally source the river products like sand and aggregates while executing development works.
Among others, the general convention of the FCAN has also decided to start a process to procure land and build a FCAN Tower - an official building of the federation - in the near future.

Construction expo aims at 30,000 visitors

Nepa Construction Exhibitions (NCE), which is organizing its first construction exhibition- Nepa Construction Expo 2012 - from Friday has announced completion of preparations for the five-day event.
"Ninety seven percent of the stalls at the main exhibition hall at Brikutimandap have already been booked," said Ram Sharan Deuja, managing director of NCE. Though participants are yet to confirm bookings for stalls in the Heavy Equipment Pavilion, built outside the expo hall, he said these also would be fully occupied before the event kicks off.
The expo, which continues till December 4, will bring under a single roof all the products and services that people need while constructing a house or carrying out any other construction work.
The expo will be participated by contractors, business firms, building designers, architects, manufacturers and distributors of construction material, construction equipment and machinery importers and banks and insurance firms, said Deuja.
The organizers have targeted not just the general public but also development agencies that carry out different construction works. That is why it has arranged for a Heavy Equipment Pavilion with space for 16 stalls where heavy equipment importers and distributors can showcase their products and services.
"Forty-eight stalls have been allocated for different construction materials," said Deuja.
The expo will also rope in architects and interior design, vastu and other consulting firms so that visitors can get all the information needed on how they can best construct their homes and other buildings.
"Our claim is it is a must-visit for the general public who plan to construct or renovate their houses and also for urban planners," said Deuja, adding that the expo will showcase and inform visitors about emerging technologies in construction.
NCE has also announced that it will be organizing workshops during the event and the secretary at the Ministry of Physical Planning, Works and Transport Management will be making presentations on the government´s development endeavors and the present and future of the construction industry here.
The workshops will bring international experts as well, said Deuja.
The organizers hope to draw 30,000 visitors. A nominal entrance fee for general visitors will be spent on a social cause.

FNCCI to identify potential projects

At a time when political situation in the country is worsening, entrepreneurs have taken initiative to bring fresh investment in areas such as infrastructure, agriculture and hydropower, among others.
According to a press release issued on Sunday, businessmen gathered in Lalitpur to make preparation for Chitwan Fair-2069 reached to such a conclusion. "The 10-day fair will focus on identifying the prospective projects based in the central development region," reads the release.
Suraj Vaidya, president of Federation of Nepalese Chambers of Commerce and Industry, said they will be organizing similar fairs in all development regions of the country to mark the Investment Year 2012/13."
The entrepreneurs also held discussions on the prospects and constraints of making new investment. "There are problems such as power shortage and political instability, but we must work to improve the situation,” Ajar Man Joshi, president of Lalitpur Chamber of Commerce and Industry (LCCI), said in the meeting.
The government has announced to celebrate fiscal year 2012/13 as Investment Year in a bid to lure foreign investors in the country.

Nepal, B'desh talks fail to settle DTAA issues

The bilateral talks of tax official from Nepal and Bangladesh failed to finalize the text of Double Taxation Avoidance Agreement (DTAA) after the latter did not agree to incorporate a clause that would allow the tax authority of a country to collect revenue on behalf of the other when requested.
“It is not that Bangladeshi officials differed over the principle and spirit of this provision. Still they could not go for it because Bangladesh´s policy does not allow them to collect revenue on behalf of other country,” said Tanka Mani Sharma, director general of Inland Revenue Department (IRD), who led the Nepali team.
Despite the difference on the provision, Sharma said the two sides have managed to finalize most of the portion of the DTAA text. “We will sit for another meeting soon to resolve the issue,” Sharma told Republica.
The next meeting, however, would be held only after Bangladesh decides on how it could address the provision that Nepal has pushed since 2001.
Nepal has been pushing for the inclusion of the provision mainly as it would enable both the tax authorities to recoup the revenue at any time and from either country even if the investors and traders managed to dodge the revenue officials or shut down the operations without clearing tax dues in a country.
Nepal has been looking forward to signing DTAA with Bangladesh since 1998. The two sides had held first negotiations in 1998 and then in 2001. However, two sides had maintained a complete silence on the agreement for more than a decade.
“The latest consultation held in Dhaka last week has resumed the bilateral talks after a gap of more than a decade,” said Sharma, expressing the hope that the two sides would be able to settle their difference and finalize the pact at the earliest.
The talks on DTAA had got a fresh start mainly after the government this year committed to celebrate 2012/13 as Nepal Investment Year and placed huge importance on singing the agreement with about half a dozen countries in a bid to convince and attract foreign investors.
Officials said the government plans to sign DTAA with Bangladesh at the earliest. As the pact frees investors and traders from the need of paying taxes in both the countries, the government believes signing of the DTAA could prove instrumental in realizing substantial investment and increasing trade with the second largest trading partner of South Asia.
As of 2010/11, Nepal received just Rs 520 million of investment from Bangladesh, according to statistics of Department of Industry (DoI). Presently, there are 26 Bangladeshi joint ventures operating in Nepal and they are providing jobs to 4,166 people.
Moreover, Bangladesh is one of the few countries with which Nepal has trade surplus. According to the Trade and Export Promotion Centre (TEPC), Nepal exported goods worth Rs 2.57 billion to Bangladesh and imported goods worth Rs 1.50 billion, posting just over 1 billion in trade surplus in 2011/12.

Current economic outlook worries pvt sector

Private sector leaders have urged the political parties to forge consensus so as to end the political uncertainty that has inflicted huge economic loss to the country.
“Our country is lagging behind in terms of economic activities due to prolonged political uncertainty in the country. It is high time for the political parties to forge consensus to bail the country out of the current economic mess," said Suraj Vaidya, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) while inaugurating the 31st Annual General Assembly of Nawalparasi Chamber of Commerce and Industry on Saturday.
He also expressed dissatisfaction with political parties for not forging consensus on full-fledged budget, which is crucial for economic development of the country."The country has plunged into yet another economic quagmire as the government failed to come up with a full-fledged budget," said Vaidya.
The government had announced two-third budget on Tuesday through ordinance without consultation with the opposition parties. He also warned that absence of full-fledged budget would have a negative impact on hydropower and infrastructure projects.
Guna Nidhi Tiwari, central member of FNCCI also asked the political parties to keep economic sector away from the influence of politics.
Devenra Raj Kandel, former state- minister for Home Affairs, also stressed the need for an immediate end to the existing political stalemate to pave the way for smooth functioning of economy.

CPN-Maoist threat worries GMR

Indian power developer GMR, which is also the promoter of the 900MW Upper Karnali Hydropower Project, has expressed grave concern over the recent decision of the CPN-Maoist to launch “ "strugg”e" against projects being developed by Indian companies.“
"GMR has expressed its concern in writing," a source at the prime minister´s office told Republica, adding the Indian company has asked the government to pay serious attention to the CPN-Maoist decision and provide adequate security at the project site. As per the agreement with the government, the Indian company has to complete the Upper Karnali Hydropower Project by 2016.
The Bheri-Karnali state committee of the CPN-Maoist has decided to form a security squad to chase away GMR officials. According to Kalendra Sejuwal, Surkhet based reporter of Republica, the state committee took such a decision to safeguard the sovereignty of the countr“. "The party has been keeping a close eye on projects that have been awarded to Indian companies," Sejuwal said quoting Bharat Bam, secretary of the Bheri-Karnali state committee of the CPN-Maoist.
Meanwhile, Pampha Bhusal, spokesperson for the CPN-Maoist said the party was totally again“t "projects that do not serve national intere”ts". She further added that the people of Karnali are against the project and that the party supports the“. "The project was awarded to GMR without competitive bidding.
Also, the company does not aim to run the project in full capacity. Upper Karnali can generate more than 4,000 MW of hydroelectricity project," she told over phone to Republica.
The GMR also has forwarded its letter to the Investment Board of Nepal (IBN). The IBN, however, has so far not responded to GMR´s concern.“
"The IBN has not yet responded as how it would protect the project from the so-called nationalists," said an official at the prime minister´s office.
Radesh Pant, CEO of IBN could not be contacted for comments despite several attempts. The government has awarded Upper Karnali Hydropower Project to GMR under the build-own-operate-transfer (BOOT) model.
Additionally, other foreign power developers also have expressed concern over the situation in the country. "Other developers have not come up with formal letters but they also share similar concerns," said the official.

'Unorganized supply chain affecting honey exports'

Experts and stakeholders on Friday lamented that Nepali honey has not been able to penetrate international markets despite having huge demand from Japan, Belgium, US and some European countries.
"Scattered production and unorganized supply chain, among others, are the major factors impeding Nepali honey exports,” Rajendra Singh of Trade and Export Promotion Centre (TEPC) said, presenting a paper on ´Trade Scenario of Nepali Honey´.
Sharing the current situation of honey trade in domestic as well as international market in the national stakeholders´ participatory workshop on value chain, Singh said Nepali honey producers have not been able to get desired benefits from the international market.
The workshop focused on developing an action plan and implementation strategies to expand as well as diversify market, identifying the roles and responsibilities of all key stakeholders, among others.
"Value chain actors have major role to play in terms of market expansion," Prabhakar Pathak, joint secretary at the Ministry of Agriculture Development (MoAD), said.
According to TEPC, USA, UK, Japan, France and Germany are the top markets for Nepali honey. "Honey import by these countries is growing by 14 percent every year," Singh said.
Beekeepers said the traditional technology and limited medicines and veterinary services were the major factors affecting honey production.

Country might face severe financial crisis: Vaidya

Business community leaders have warned that the country could face serious financial crisis due to lack of full-fledged budget for the current fiscal year.
Suraj Vaidya, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said that the country has fallen into a financial crisis due to political parties´ inability to forge consensus to bring a full fledged budget.
A press release issued on Friday said Vaidya expressed concern over the country´s financial situation while addressing the annual meeting of the Nawalparasi Chambers of Commerce and Industry (NCCI). "We urge all the poltical parties to come togthere and bring a full fledged budget for this fiscal year 2012/13 in order to save country from a severe financial crisis," said Vaidya.
Highlighting the critical situation in the country, Vaidya said there should be a fix date to bring a fiscal budget each year. "Our repeated request to bring a full fledged budget fell on deaf ears," Vaidya said. "Political parties should be responsible and give a way out to the country at the earliest."
Additionally, entrepreneurs from the districts also expressed their concern over government´s revenue collection policy.

ADB commits to complete tender process by March

The Asian Development Bank (ADB) has expressed commitment to select a new contractor for Melamchi Drinking Water Project (MDWP) within March 2013.
The multilateral donor expressed its commitment after the project became uncertain following termination of tunneling contract with China Railway 15 Bureau Group about two months ago.
"The meeting between government and ADB officials held on Tuesday to review progress of ADB-funded projects was focused on implementation of the mega drinking water project,” a high level government official told Republica. “ADB officials have assured us that tender process will be completed by March next year.”
The official said ADB officials have assured them that the multilateral donor would expedite works so that the bidding process could be completed within the stipulated time.
According to state-run news agency Rastriya Samarchar Samiti (RSS), Melamchi Water Supply Development Board (MWSDB) -- the implementing agency of the project -- has already finalized the bidding document for construction of the tunnel and is preparing to invite international bidding for the same within this week.
Ghanshyam Bhattarai, executive director of MDWP, said they would invite global bids for the project by this Friday.
The Chinese contractor had abruptly left the project after digging 6.5 km tunnel.
“The project works will be resumed from the point where the Chinese contractor had left. All other issues relating to the resumption of works would be finalized after holding discussions with designated consultants," the news agency quoted Bhattarai as saying.
The project, which targets to supply daily 170 million liters of water to the capital, is expected to cost more than US$ 464 million.
Juan Miranda, director general of the South Asian Department of the ADB, in a recent press conference in the capital has expressed commitment to continue support for the much delayed project until its completion.

Private sector, opposition parties, economists flay govt

Opposition parties, economists and private sector representatives have lambasted the government alleging that it ignored economic problems facing the country.
Leaders of opposition parties including the Nepali Congress and the CPN-UML held discussion with business leaders and economists on Tuesday in a bid to seek a way out of the existing economic problems.
Presenting a ´concept paper´ on country´s economy and budget issues on behalf of 15 agitating oppositional parties, former finance minister Surendra Pandey said the government had failed to boost the economic growth.
"Given the situation, it is sure that country will not achieve even 2.5 percent growth in the current fiscal year,” said Pandey.
He also clarified that opposition parties were not against announcing budget and flayed the government for ignoring the politics of consensus by attempting to announce budget unilaterally.
"The government, a coalition of UCPN (Maoist) and other Madhes-based parties have dismissed the spirit of national consensus," read the concept paper.
The government had brought one-third budget in June for first four months of this fiscal year, expressing commitment to announce full-fledged budget with national consensus.
The concept-paper also highlighted the government´s inefficiency in maintaining desired capital expenditure though the rise in revenue mobilization.
"The government has increased revenue collection but it has failed to make capital expenditure. More than Rs 32 billion has remained unspent during the last four months," stated the concept paper.
The concept paper has also highlighted the situation of weak law and order, increasing cases of corruption inside the government mechanism and slowing down of industrial sector.
"Reported irregularities at the initial bidding process of proposed Pokhara Regional International Airport and over-night decision to procure airplanes for Nepal Airlines Corporation are the major cases of extreme corruption within the government. The Prime Minister himself is not ignorant about it,” read the concept paper.
In the interaction, economists, former vice-chairpersons of National Planning Commission and private sector leaders had also echoed the sentiment expressed by the concept paper and opposition leaders.

Nepal, B'desh start consultation on DTAA

Nepal has commenced pre-negotiation consultations on Double Taxation Avoidance Agreement (DTAA) with Bangladesh, eyeing to attract more investment from the second largest South Asian trading partner by laying down a more lucrative investment regime between the two countries.
A four-member team of officials under the leadership of Tanka Mani Sharma, director general of the Inland Revenue Department (IRD) left for Bangladesh on Friday to have a pre-negotiation consultation with the Bangladeshi officials, a source at the Ministry of Finance (MoF) told Republica.
The team has been entrusted to pave the way for starting the final negotiations on text of DTAA. "The officials from two countries will sit for final negotiation after some time based on the results of this consultation," the source said.
According to the source, the government has almost finalized the text of DTAA to be signed with Bangladesh. Two countries had already shared the text of DTAA earlier. "So, this consultation meeting will discuss on the shared DTAA text," said the source.
The government plans to sign DTAA with Bangladesh in the near future in order to free the investors and traders from Nepal and Bangladesh from the need of paying taxes in both the countries. With it, the officials believe Nepal would receive more foreign investment from Bangladesh.
As of 2010/11, Nepal has received just Rs 520 million of investment from Bangladesh. Statistics of the Department of Industry (DoI) show a total of 26 Bangladeshi joint ventures operating in Nepal which are providing jobs to 4,166 people.
Moreover, Bangladesh is one of the few countries with which Nepal has trade surplus.
According to the Trade and Export Promotion Center (TEPC), Nepal exported goods worth Rs 2.57 billion to Bangladesh and imported goods worth Rs 1.50 billion, posting a trade surplus of just over Rs 1 billion in 2011/12.