Govt forms panels to conduct studies on 3 PEs

The Corporation Coordination and Privatization Division under the Ministry of Finance (MoF) has formed three committees to conduct detailed studies on present status of three public enterprises (PEs).
The committees, formed under Prem Banadur Pandey, an MoF official, will assess economic viability, liabilities and assets of Nepal Drugs Limited, Nepal Orind Magnesite and Nepal Metal Company.
Based on the reports, the government will decide on whether to start their operation on its own, hand them over to the private sector or invite a strategic investor, or liquidate them.
“These committees will start working once Terms of References are handed to them,” Hari Saran Pudasaini, an MoF under secretary, told Republica on Friday.
Each of the five-member committee includes chief or acting chief of the public enterprise, two employees from each of the enterprise and an official of the Ministry of Industry, according to Pudasaini.
“They will work together with Pandey to identify strengths and weaknesses of the three enterprises,” Pudasaini informed.
The government move comes at a time when all three state-owned enterprises have either stopped production or never come into operation due to various reasons.
Of the three, Nepal Drugs was shut down around three years ago after failing to comply with the standards set by the Department of Drugs Administration due to lack of funds to upgrade its production facility.
Despite its closure, the government has been injecting around Rs 4 million per month in the company to extend salary to 280 employees who are still in the payroll. However, a business plan submitted by the company in August 2011, states it can generate annual revenue of Rs 1 billion by manufacturing 100 different brands of medicine if the government injects a capital of Rs 520 million into it.
Likewise, Orind Magnesite, which manufactures magnesite and talc powder, has not been operating in full capacity due to lack of modern machineries, while Nepal Metal, which is involved in mining of zinc-lead ores and concentrates from Ganesh Himal area, has not conducted any mining work since its establishment in June 1976 due to technological barriers and financial resources.
The committees will basically assess economic viability and long-term prospect of three public enterprises. They will also evaluate staff liabilities and other liabilities, including bank and government loans, and assets held by the enterprises.
The government is currently conducting similar study on Janakpur Cigarette Factory, which has remained closed for almost three years now due to lack of raw materials and obsolete machineries.

India blamed for low intra-regional trade

Indian officials have said that the union government can´t impose any rule on state governments even though the latter ones are acting against the spirit of bilateral trade agreements between Nepal and India.
“The union government can´t force state governments on issues related to bilateral trade agreements," Sandep Kumar, commissioner (international customs division), Central Board of Excise and Customs under Department of Revenue of the Indian government, said.
Talking about country positions on non-tariff barriers (NTBs) - different obstacles that traders face other than customs duty - in South Asia at a regional conference here on Thursday, Kumar said the Indian government may not always be ready to remove all kind of NTBs.
"NTBs are always not bad, sometimes they serve some specific interests of the country," Kumar told a conference organized jointly by CUTS International, a think tank based in India and The Asia Foundation.
Nepali traders have been facing several hurdles due to different provisions enforced by the Uttar Pradesh (UP) government. Medicinal herbs worth around Rs 350 million was stuck in Nepalgunj customs point for several months last year after the UP government introduce a new law that contravenes the bilateral trade agreement between the two countries.
“The state governments can formulate their own laws,” Kumar said, answering a query on whether the whether the central government can intervene when the state governments formulate laws that go against the spirit of bilateral agreements.
Meanwhile, businessmen, officials and experts from the South Asia region have said most of the NTBs are outcomes of policies created by the government with political intention.
“Political intention is the main reason behind introduction of NTBs,” Robina Ather, joint secretary at Customs and Trade Policy under Pakistan´s Ministry of Commerce, said. “It is because of India that intra-regional trade stands at such a low volume.”
Businessmen from the region have urged governments and stakeholders to focus on development of cross-border infrastructure and ease visa process for the traders. "The governments of all the countries from the region should put effort on cross-border infrastructure development," Kosala Wickramanayake, former president of Federation of Chambers of Commerce and Industry of Sri Lanka, said.
Meanwhile, officials and experts from the region have urged for diversification of products and markets instead of competing in the same market with almost same kind of goods. They have also stressed the need to focus on intra-regional trade by removing different barriers.
"Most of the countries from the region produce same kind of products such as textiles and compete for the American or European market," Indira Murthy, director of Foreign Trade at India´s Department of Commerce, said.
Bipul Chattargee, deputy executive director of CUTS, said SAARC Chambers of Commerce and Industry should assist the governments in order to minimize NTBs.

DoED collects Rs 2.54b in royalty from power producers

The Department of Electricity Development (DoED) collected Rs 2.54 billion in royalty from power producers in fiscal year 2011/12, including due royalty amount of Rs 1.66 billion.
Of the total amount collected last fiscal year, Rs 880 million was received from power producers as royalty for fiscal year 2011/12. The amount is short of 1.15-billion-rupee target set for the year.
"We are yet to collect Rs 270 million from power producers as royalty of last fiscal year," Gokarna Raj Pantha, a senior DoED engineer, told Republica.
Of the due amount, Rs 140 million has to be paid by Nepal Electricity Authority (NEA), while Rs 130 million needs to be collected from private power producers.
"State-owned NEA has not paid due amount citing financial problems," Pantha said. “However, it has cleared previous dues.”
One of the jobs of the DoED is to collect royalty from power producers.
Half of the royalty collected from power producers goes to respective district development committee. "The remaining 50 percent goes to state coffers," Pantha said.
However, independent power producers have claimed that the royalty distribution mechanism was not transparent.
"There is a problem in DoED´s royalty distribution mechanism," an official of the Independent Power Producers´ Association Nepal (IPPAN) said on condition of anonymity.
Pantha, however, said such claims were baseless.
"I don´t think anything like that is happening," he said. "A team of officials from three different ministries, namely, the Ministry of Local Development, the Ministry of Energy and the Ministry of Finance, takes decision on distribution of royalty."
According to regulations on local governance, the government needs to send 12 percent of the hydropower royalty to DDCs that house power plants. Another 38 percent of the royalty should go to development regions where power plants are located.
However, the IPPAN has said the royalty distribution process was slow and inefficient. "This angers locals," the IPPAN official said.

IBN devises plan to lure FDI

The Investment Board of Nepal (IBN) is devising phase-wise programs to attract foreign investment in the country.
“We are holding discussions with top level officials from concerned government agencies to devise programs for attracting foreign direct investment in the country,” Mukunda Paudel, joint secretary at IBN Secretariat, told Republica. “A meeting between top officials and a team of investment experts from India held on Friday discussed on some future measures to be taken by the board.”
The IBN Secretariat has proposed phase-wise programs to attract investment from both local and foreign investors. “In the first phase, we will identify strategic sectors to inject investment," Paudel said, adding that the board would closely work with all stakeholders to identify the strategic sectors.
The IBN, which has been formed under Investment Board Act 2011, has said that it would develop promotional activities after identifying the strategic sectors for investment. "IBN has built institutional capacity over the past one and half years. It´s high time we gave impetus on bringing FDI in the country,” added Paudel.
The government had formed IBN with an ambitious plan to bring FDI worth US$ 1 billion FDI in the first half of the current fiscal year. "We will soon launch different programs to lure foreign investment in the country," Paudel said without elaborating what the programs would be.
Meanwhile, the board is working on adopting the approach that Indian state of Gujrat has adopted in attracting investors for large scale projects. “Two experts involved in Vibrant Gujrat, a program designed for development of the state, are currently in Nepal,” Paudel said, adding, “We held discussion with them on the modalities adopted by them to attract large scale investment.”
The IBN is also implementing five mega hydropower projects - Tamakoshi III (650 MW), Upper Karnali (900 MW), Upper Marshyangdi (600 MW), Arun III (900 MW) and West Seti (750 MW).
Unfortunately, the board, which came into being with the objective to take projects forward in a fast track mode, has not even been able to seal a deal for a single project.

Power producers press for PPA with 'super-six' projects

Independent power producers have urged the government to direct the Nepal Electricity Authority (NEA) to immediately ink power purchase agreement (PPA) with “super-six” hydropower projects.
Submitting a memorandum to Energy Minister Uma Kant Jha, independent power producers have requested the government to issue strong directives to NEA to expedite the “super-six” projects.
The six projects -- 16 megawatts Singiti, 24.1 megawatts Khare, 23.5 megawatts Upper Solu, 82 megawatts Lower Solu, 14.9 megawatts Maya Khola and 50 megawatts Mewa -- are awaiting PPA with NEA though they are all set to kick off construction.
“The projects that have paid premium money to the government shouldn´t be kept in limbo,” reads the memorandum submitted to the minister. “We are deeply concerned over the development of these projects.”
The NEA is dilly-dallying to sign PPA though the projects were awarded through competitive bidding process for the first time. Before that, the hydropower projects were awarded to developers on first-come-first-serve basis. The government had even pledged to develop transmission lines while awarding these projects to the developers.
Officials of Independent Power Producers´ Association, Nepal (IPPAN) had met minister Jha at the latter´s office in Singha Durbar on Friday and submitted a 10-point memorandum demanding that the government´s decision to hike license fees be scrapped. “The government´s decision to increase survey license fee has had a negative effect on the hydropower sector,” reads the memorandum. “We request government to scrap that decision.” The government had increased survey license fee in October 2012 through a notice in the gazette.
“The hike in license fee has discouraged hydropower developers,” states the memorandum. “The government should take other measures to ensure timely completion of projects instead of increasing the license fee.”
The independent power producers have also stressed on expediting project development agreement (PDA), power negotiation agreement (PNA), PPA for hydropower projects above 25 megawatts, revision in PPA rate, and VAT exemption on civil construction materials, among others.
Similarly, power producers have urged the government to be serious about developing transmission lines. “Development of transmission lines is a need of the hour,” reads the memorandum. “Lack of transmission lines is one of the major bottlenecks for hydropower development in the country.
” Further, the power producers have also asked government to establish a power trading corporation as early as possible in order to address the issue of transmission lines in the country.

Hydro-power license holders' litmus test

Over a one-and-a-half month period, the government has cancelled 38 survey licenses issued for proposed hydropower projects.
The pace of cancellations is the fastest ever, not counting the latest lot, only 51 licenses had been revoked over the last two decades. The government´s latest move to increase license fee resulted in the soaring number of cancellations.
"Most of the developers are either not paying their survey license renewal fees or have withdrawn their applications after the government increased the fee," said Gokarna Raj Pantha, a senior divisional engineer at the Department of Electricity Development (DoED).
In October 2012, the government amended the Electricity Regulations, 1993 to discourage license holders who have not shown genuine intentions of developing hydropower projects.
"The amendment to the regulations to increase the survey license fee has helped us identify the genuine developers," Pantha, said.
The amendment has categorized hydropower projects’ survey licenses into six groups, fixing license fees ranging from one million rupees to six million rupees depending on the scale of proposed power generation.
One million rupees has been fixed as the license fee for hydropower projects with capacity to generate 1 MW to 5 MW electricity, two million rupees for those with 5 MW to 10 MW, and three million rupees for 10 MW to 25 MW projects.
For larger projects, those with proposed capacity of generating 25 MW to 100 MW of electricity will have to pay four million rupees as license fee and for those with 100 MW to 500 MW will have to pay five million while for those above planning to generate more than 500 MW capacity plants, the license fee has been fixed at 6 million rupees.
Earlier, the rates for survey licenses ranged from a minimum Rs 50,000 to a maximum Rs 200,000.
With the new regulations, the growing penchant of so-called developers to hold licenses to put the precious water resources under their control has been significantly discouraged.
The government has warned that it will cancel survey licenses of around 1,600 proposed projects, which includes small, medium and large scale, to cleanse anomalies among license holders’s intentions.
"There was a very bad tendency to hold licenses as the fee was very nominal. The government has now taken strong measures to make license holders more serious on timely executing the projects or pave the way for other developers,” Pantha said.
The Electricity Act, 1992 had cleared the deck for issuing licenses to the private sector to develop hydropower projects. That act had opened the floodgates with the fee for acquiring a license for developing a hydropower project was a negligible Rs 150 per project.
In 2007, the government increased the survey license fee to Rs 50,000. "But the rise in survey license fee in 2007 failed to make any significant change in the mindset of unscrupulous developers. Rather, the tendency to apply for new survey licenses went further up since then,” added Pantha. According to statistics compiled by the DoED, most of the survey licenses were issued after 2007
It has been clear that a low survey license fee is the key reason behind the bleak picture of project execution on time.
"The sharp rise in license fee has forced unscrupulous license holders to bow out, paving the way for genuine developers. We are hopeful that the ill-practice of securing licenses without any project implementation plan will drop gradually,” said Pantha.
According to DoED´s statistics, there are just 187 valid survey licenses which have a total 12,169 MW installation capacity.
These projects are of more than 1 MW capacity each.
Similarly, there are 250 valid hydropower project survey licenses which make up a total of 150 MW installation capacities.
The DoED has issued generation licenses to 87 projects, out of which just 51 projects are under construction with proposed capacity to generate 1,841 MW electricity.
The remaining 36 projects that have not started implementation process have a total 687 MW of installation capacity.
Though officials said the sharp rise in license fee has discouraged the practice of holding licenses for malfeasant intentions, the end result of the government move is still to be seen in the actual implementation of projects by those who are retaining their licenses by paying the increased fees. “It is time for us to judge the genuineness of those who have renewed their licenses after paying the increased licenses fees,” added Pantha.

Four firms may be declared 'sick'

The Ministry of Industry (MoI) is soon recommending the government to declare four firms as sick industries. The ministry finalized the names after conducting field visits and completing due diligence audit of the firms.
According to sources, the ministry will recommend the government to declare Birat Shoes, Birat Leather, Shree Nepal Borders and Basulingi Pvt Ltd as sick industries.
“We are currently studying due diligence auditing and field study reports prepared by a team of officials," said Yam Kumari Khatiwada, joint secretary at the MoI, who chairs the technical committee of sick industries at the ministry. "We, however, are yet to make a formal decision.”
The ministry had outsourced a team of chartered accountants to conduct due diligence auditing of the firms.
"Going by the report, it seems that we will recommend the government to declare four firms as sick industries,” said Khatiwada.
However, a source privy to the issue said the technical committee has already decided to recommend four firms. “The meeting minutes are yet to written. But an understanding has been reached to recommend four firms,” the source added.
The government had formed a technical committee to carry out a study to find out the actual situation of the firms that have applied to get status of sick industries. The government has already announced a slew of facilities for the sick industries. Around 30 firms had applied for the facility.

Baidya-affiliated trade unionists attack Ncell HQ

Activists of All Nepal Communications, Printing and Publication Workers´ Union (ANCPPWU), which is affiliated to the CPN-Maoist, attacked the Ncell head office at New Baneshwore on Tuesday afternoon, causing some physical damage to the premises.
Ncell is a joint venture foreign telecommunications company.
Ncell has said that it is shocked by the incident. "Such an attack on the company when there were a number of customers at the Ncell centre and in other parts of the building is grossly inhumane. We strongly condemn it," reads a press release issued Tuesday evening.
However, Janma Dev Jaisi, coordinator of ANCPPWU, said, "Our friends impulsively attacked the building after police misbehaved with us while we were staging peaceful demonstrations in front of the Ncell building." He added that they were staging the demonstration outside the Ncell office to protest the removal of 87 staffers at Hello Nepal.
Commenting on the reason for the attack given by the Maoists, Ncell said, "Ncell is a totally different business entity. It cannot solve whatever their concerns may be."

Protesters claim that Hello Nepal was taken over by TeliaSonera, which owns a majority stake in Ncell. "Now it´s Ncell´s responsibility to reinstate our friends at Hello Nepal," Jaisi claimed. "Hello Nepal had forcefully removed them from their jobs."
Refuting Jaisi´s claim, police said they tried to stop a group of activists trying to vandalize the Ncell office. "A group of around 30 people were attacking the Ncell office," said Bhim Dhakal, Deputy Superintendent of Police at the Metropolitan Police Circle Office New Baneshwore. "We have arrested six people engaged in the attack."
According to Dahal, Ek bahadur Khatri, 34, from Gorkha; Lila Bahadur Thapa, 28, from Sindhuli; Tek Bahadur Basnet, 39, from Solukhumbu; and Kamesh Kumar Yadav, 20, from Rauthat; Tara Chanda Dhungana, 45, from Kavre; and Narayan Bahadur Kunwar, 41, from Kavre have been arrested. "We have filed cases against them under the Public Offences Act," Dhakal said.
Condemning the attack, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has also issued a press release. "We strongly condemn the attack on Ncell," reads the statement. "It is a shame that the business community has been attacked one after another."
FNCCI, an umbrella organization of the private sector, said the attack has cost the country a great deal. "This attack has once again created fear among foreign as well as domestic investors," reads the release, adding, "We strongly urge the government to ensure law and order and provide security to the business community.The most shameful thing is that attacks on the business community have happened from groups that have the protection of political parties."
The statement from Ncell further says, "Such attacks on a leading private sector company will vitiate the investment climate and discourage both domestic and foreign investors. Ncell requests the government to immediately improve the law and order situation and bolster the business climate."

Workshop for brick kilns operators kicks off

In a bid to make the brick industry more energy efficient, a five-day workshop kicked off here on Sunday to make entrepreneurs involved in the industry aware about the consumption pattern of energy.
The workshop jointly organized by Energy Efficiency Centre at Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Federation of Nepalese Brick Industries (FNBI) includes technical sessions to share information on ways to make fixed chimney type kilns more energy efficient.
More than 40 people involved in brick manufacturing business are participating in the workshop, according to a press release on Sunday.
"During the workshop, experts will also carry out energy audits in three brick kilns within the Kathmandu valley and support in local capacity development by providing exposure to the cleaner clay fired brick production technologies. The brick industry is one of the energy intensive sectors," the release stated, quoting the research findings conducted by Nepal Energy Efficiency Program (NEEP) of German International Development Agency (GIZ).
Currently, there are around around 700 brick kilns in operation across the country.

Govt to formulate policy for management of individual PEs

The government is formulating a policy on management of individual state-owned enterprises in the country, incorporating the option of liquidating loss-making enterprises that do not have future prospects and are turning into liabilities for the state.
"The draft policy on the verge of finalization will have guidelines on management of individual public enterprises (PEs)," a high-ranking official of the Ministry of Finance (MoF) told Republica on condition of anonymity. "The policy will also categorically prescribe every PE to either operate in a professional manner or go for liquidation."
The PEs established in the 1970s and the 1980s have been inflicting huge losses on the government due mismanagement and overstaffing. "This is the time to take a clear line on their future course," the official said, declining to divulge details of the policy and treatment each PE is likely to receive. He only said: "Discussions are still underway on what to do with each PE."
Currently, only 14 of the total of 37 PEs in the country are generating profit, according to the MoF´s Economic Survey 2011/12. The rest are inflicting losses to the tune of Rs 1 billion per year on the government.
In many cases, the government has even been forced to pay workers of PEs that are not in operation due to delay in introduction of voluntary retirement schemes and pressure from political parties to keep them open. One of such PE is Janakpur Cigarette Factory, where around 900 workers are employed. Another such PE is Nepal Drugs Limited, where the government is pouring around Rs 4 million per month to pay workers.
The government had earlier decided to manage PEs through the PE Board, established last year. At the time of its establishment it was said the Board would take the lead in recommending reform measures to the government to enhance the performance of all PEs. It was also said the Board would also be responsible for prescribing suitable restructuring models for troubled PEs, such as merger, public private partnership or liquidation, among others, to enhance their efficiency.
However, the Board´s role so far has been restricted to appointment of chief executives of different PEs through open competition.
"Although the finance ministry generally does not intervene in the Board´s work, we will ask it to make decisions based on the policy," the official said.
Giving examples of inconsistency of the government´s decisions about the management of PEs, the official said that every government has its own vested interest with regards to operation of PEs. "In most cases, political parties have used PEs as a platform to feed their cadres," the official said.
The policy will offer clear guidelines on operation of PEs and their modality of operation, the official said.

Private sector sees a bleaker future

The private sector is not optimistic about the future of economic activities even after an election government was formed under the leadership of Chief Justice Khil Raj Regmi based on a 11-point pact signed by the four major political parties.
"The election is not likely to take place in June," Suraj Vaidya, the president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the apex body of the private sector, said Thursday. "We wish for the election to happen on time but as the parties have already indicated that that wouldn´t be taking place by setting another date."
The private sector had opposed the 11-point pact saying that the documents lacked economic agendas. "We have lost a complete year without a full-fledged budget in place," Vaidya said. "We fear that another year also might go by without a budget being brought on time."
Despite the doubts, Vaidya expressed hopes about the newly formed government. "I am hopeful that this government will be able to hold an election but I am not sure it will be in June," he said.
Similarly, Narendra Basnet, the president of the Confederation of Nepalese Industries (CNI), said the newly formed government would make the required efforts to hold an election on time.
"The private sector is looking for better performance in the economic front," Basnet said. "I am hopeful that an election will take place and the country´s political situation will get better."
Suresh Basnet, the president of Nepal Chamber of Commerce (NCC), also echoed the thought. "We are hopeful but things are still fragile in the country," Basnet said. "The political parties have lost confidence. This 11-point pact is the result of their ego." He further added that he was looking for election to take place on time though that still seems a distant wish.

44% of people under poverty line: UNDP

United Nations Development Program (UNDP), in its report of the Human Development Index (HDI) 2013, has reveled that 44 percent of the people in Nepal are still under the poverty line based on the multidimensional poverty measurement system.
The HDI multidimensional poverty index is an alternative to income-based poverty estimates. "The population living in poverty in Nepal is higher compared to other countries in the region," reads a statement by UNDP. "The employment to population ratio in Nepal is 86.4 percent."
Similarly, the report shows that child labor in Nepal is also relatively higher. "More than one third of the children between ages five and 14 are economically active in Nepal," reads the statement issued on Thursday.
The report, that shows a better picture of the South Asian region in the global map, has said that 80 percent of the world´s middle class will live in the region by 2030. “The rise of South Asia is unprecedented in its speed and scale," reads the statement. "Never in history have living conditions and prospects of so many people changed so dramatically and so fast."
Further, the region registered an annual growth of 1.43 percent in HDI values between 2000 and 2012, which is the highest compared to other regions in the world.

Nepal, Japan ink loan deal for Tanahun Hydropower Project

The Japan government on Wednesday signed a loan agreement worth US$ 184 million for the development of 140 megawatts Tanahun Hydropower project.
The loan extended through Japan International Cooperation Agency (JICA) -- an official agency of Japanese government for international development -- has 40 years of repayment period. JICA, which is a lead funding partner for the development of the Tanahun Hydropower project, has provided the loan at 0.01 percent interest rate.
The loan agreement was signed by Joint Secretary at the Ministry of Finance (MoF) Madhu Kumar Marasini and Masataka Nakahara, director general of South Asia Department of JICA. “JICA is happy to extend the loan for the development of storage type hydropower project,” Nakahara said after signing the loan agreement. “This project can be helpful in removing development bottlenecks of the country that have resulted from acute power shortage.”
The project that would be developed by Nepal Electricity Authority (NEA) has already secured a total of US$ 434 million from various development partners.
As of now, the government has successfully garnered funding from Asian Development Bank (ADB), European Investment Bank (EIB) and Abu Dhabi Fund for Development (ADFD) and JICA. According to Marasini, EIB has expressed commitment to provide a loan of US$ 70 million and ADFD US$ 30 million to Nepal for the development of the project.
The estimated cost of the project is US$ 505 million and is expected to get completed by October 2020. “I request the government of Nepal to ensure transparency and accountability while implementing the project,” Kunio Takahashi, ambassador of Japan to Nepal said at the function organized to sign the loan agreement.
ADB, which is responsible for hiring consultants for the project, has already endorsed loan for the project a couple of weeks ago. “Tanahun Hydropower is the most promising project so far in the country,” Takahashi said.
“The Japanese government is happy to be a partner in Nepal´s hydropower development endeavor.”
The Japanese government has also provided loan to develop the 60 megawatts Kulekhani Hydropower Project I, 32 megawatts Kulekhani II and 144 megawatts Kaligandaki ´A´ Hydropower Project in the past.

Abu Dhabi Fund okays US$ 30m loan for Tanahun Hydropower Project

The Abu Dhabi Fund for Development (ADFD) has endorsed a decision of its board of directors to provide US$ 30 million to Nepal for the development of 140 megawatts Tanahun Hydropower Project.
“We have received a letter from ADFD,” a high-ranking official at the Ministry of Finance (MoF) told Republica. “It formally notifies us that ADFD has decided to provide loan to us.” ADFD, a national entity of the United Arab Emirates, has sent a letter to the government notifying that it took the decision last week but it doesn´t indicate anything about interest rate and maturity period of the loan.
The government had sought loan from ADFD for the development of Tanahun Hydropower Project, the second reservoir type project after Kulekhani.
Confirming the developments, Madhu Kumar Marasini, joint secretary at MoF said that the ministry received a letter from ADFD last week. “However, meeting for further negotiations and signing of the loan agreement has not been fixed so far,” said Marasini. “The loan agreement will be signed after a detailed discussion on the terms and conditions between the two parties.”
The government has already received concessional loan from the Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and European Investment Bank (EIB) for development of the project that is expected to be completed by 2020.
The government has secured a total US$ 370 million from three development partners. According to the International Economic Cooperation Coordination Division at MoF, the government has received US$ 150 million loan from ADB, US$ 150 from JICA and US$ 70 million from EIB.
ADFD that has decided to provide loan to Nepal has not so far disclosed anything about the interest rate that it would charge on loans. “Interest rates and maturity period for loan will be negotiated later,” said Marasini.
ADB, which is a lead funding partner of the project, has already decided to provide loan to Nepal through its board of directors´ meeting in the last week of February.
“The project is too important to us,” said Marasini. “The government will do its best to complete the project on time.” The project based in Byas municipality of Tanahun district will be developed by Nepal Electricity Authority (NEA).
Additionally, the government has also decided to provide loan to NEA without charging any interest. The government expects to start the construction of the project by 2014.

Govt prepares draft IIA aimed at attracting foreign investment

The government has drafted an Integrated Investment Act (IIA) comprising all the previous acts related to investment and industries in order to attract foreign as well as domestic investment in the country.
The IIA draft is based on three existing laws namely, Investment Board Act (IBA) 2012, Industrial Enterprises Act (IEA) 1992 and Foreign Investment and Technology Transfer Act (FITTA) 1992.
“The draft of the act envisages protection of foreign as well as domestic investment in the country,” said an official involved in preparing the draft.
“This act will specifically oversee investment in the country.”The government in its mid-term review of the budget for the current fiscal year 2012/13 has categorically said that the government has prepared the draft IIA. "This act has said that the government would treat foreign investors on par with domestic ones,” the official said on condition of anonymity.
The draft Act also has reduced the list of areas that have not been opened for foreign investment, a knowledgeable source revealed. However, the source expressed reluctance to divulge details.
The draft IIA, which is based on previous Acts, has devised ways of treating foreign as well as domestic investment in the country. “The new draft has certain provisions that are aimed at promoting foreign investment in the country,” the official said.
The government so far has failed to endorse policies to create favorable environment for investment due to absence of parliament in the country. The government had announced to revise the existing IEA 1992, FITTA. Similarly, the government has been trying to endorse special economic zone (SEZ) Act in the country.
According to the official, the draft IIA is also not going to be endorsed at this time. “The draft has been formulated but it´s not going to be endorsed as other major important bills are still pending," the official said.
The government that formed Investment Board of Nepal (IBN) more than a year ago to implement mega projects has prepared drafts of different Acts over the last one-and-a-half years. “But, we have not been able to get these Acts endorsed due to absence of parliament,” said the official.

Survey license of seven hydel projects scrapped

The government has cancelled survey licenses of seven small scale hydropower projects with collective installed capacity of 30.1 megawatts for not paying survey license fee.
The hydropower projects that lost survey licenses include the 3 megawatts Roshi Khola (Kavre), 4.7 megawatts Bhuji Khola (Baglung), 6.3 megawatts Lower Jogmai (Ilam), 2.7 megawatts Yandeli Khola (Taplejung), 7.3 megawatts Lower Inwa (Taplejung), 3.1 megawatts Upper Maya Khola (Sankhusava) and 3 megawatts Lawa Khola (Morang).
The Department of Electricity Development (DoED) has decided to cancel the survey licenses of the projects after it didn´t receive the survey license fees from the developers on time. “There are other reasons as well but the major reason is survey license fee,” Gokarana Raj Pantha, senior divisional engineer at DoED told Republica.
The firms that were occupying survey licenses of the projects have been losing their licenses one after the other since the government increased the license fees in October 2012. “We have cancelled around 33 survey licenses in the last one month alone,” Pantha said. “Those projects have a collective installed capacity of 809 megawatts.”
The government had revised the survey license fees in order to discourage the practice among developers of holding licenses without making any efforts toward completing project works on time.
The hydropower survey licenses have been divided into six different categories as per the revision. The new rates for survey licenses are: Rs 1 million for 1-5 megawatts projects, Rs 2 million for 5 to 10 megawatts, Rs 3 million for 10 to 25 megawatts, Rs 4 million for 25 to 100 megawatts, Rs 5 million for 100 to 500 megawatts and Rs 6 million for hydropower projects of above 500 megawatts.
“The rates had been revised to identify genuine developers,” Pantha said. “DoED has felt that most of the license holders have failed to pay license fees on time after the revision of rates.”
According to Pantha, Premier Power Developer Limited had bagged the survey license for Roshi Khola, Amarawati Builders & Developers for Bhuji Khola, Echo W Energy Private Limited for Lower Jagmai, Shikhar Hydro Private Limited for Yandeli Khola and Lower Inwa Hydropower Limited for Lower Inwa. Similarly, the survey licenses of Upper Maya Khola and Lawa Khola were awarded to individuals.
“There are around 7 other projects which are going to lose survey licenses if they fail to pay fee within a week,” Pantha said.

Tunnel highway project in limbo as NIDC lacks convincing payback plan

The much-hyped Kathmandu-Hetauda tunnel highway project is in a limbo as the company that was supposed to undertake the project couldn´t come up with convincing plans to ink concession agreement with the government.
The government refused to sign the concession agreement after the company couldn´t demonstrate a strong payback plan and guarantee that the money people invest would be returned.
“The company has just made a very rough plan and did not convince us,” said an official at the Ministry of Physical Planning, Works and Transport Management (MoPPW). “The company also failed to show strong funding sources for development of the project.”
The Nepal Infrastructure Development Company (NIDC) that conducted the detailed project report (DPR) of the tunnel highway has been pushing the government to sign the concession agreement. “But, as a government official, I can´t even think of letting them go collect people´s money when they don´t have any payback plan,” said a high ranking official at the ministry.
“We have submitted our financial plans to the government,” said Lal Krishna KC, vice-president of NIDC. “We have not heard anything from the government about the payback plan and insurance so far.” KC further added that the company was always ready to address the concerns of the government about people´s money.
The project that the government handed over to NIDC under build-own-operate-transfer (BOOT) act- 2006 would link Kathmandu with Hetauda. “The company could not assured us as to how it would generate funds for the project,” said Secretary at MoPPW Tulsi Prasad Sitaula.
The company has claimed that it would complete the project within four years and has estimated the cost of the project at Rs 22 billion. “We are waiting for the company to come up with a strong financial plan,” Sitaula added.
The company has claimed that it would generate funds for the project from different sources such as public investment, consortium of different business groups, investment from non-resident Nepali (NRNs) and by issuing shares to the workers and contractors in return for their labor. “We are also serious about the security of people´s money,” said KC.
The ministry entrusted with overseeing development of the project has been working on identifying possible risks while developing the project. “It might take a few more months to sign the concession agreement with NIDC even if it works seriously toward addressing our concerns,” said the official in condition of anonymity.

Panel formed to review policy on liquor factory licensing

The government has formed a high-level committee to revisit its policy on licensing liquor factories in the country. The Ministry of Industry (MoI) formed the committee after its recent decision to license new liquor factories drew flak from all quarters.
The committee led by Yam Kumar Khatiwada, joint secretary at the ministry, comprises of representatives from private sector as well as other concerned government agencies.
Representatives from Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Federation of Nepalese Cottage and Small Industry (FNSCI) and Confederation of Nepalese Industries (CNI), among others have been included in the committee.
“The committee has been asked to study the existing policy and come up with recommendations to make it more appropriate in present context,” Krishna Gyawali, secretary at MoI, told Republica over phone.
The government had lifted the 12-year ban on setting up new liquor factories a couple of months ago. But after issuing licenses to some factories, the Industrial Promotion Board (IPB) had decided suspended the licensing process stating that the existing policy should be reviewed.
Following that, the 202nd meeting of IPB taken a decision to form a committee to review the policy.
“The recommendations made by the committee will work as a guiding framework for the government on the issue,” added Gyawali.
The government had stopped licensing new liquor factories in October, 2011 following severe pressure from the then CPN (Maoist) that was waging insurgency against the government. Ironically, the decision to resume licensing of new liquor factories was led by the government led by the same party.
Meanwhile, private sector says they want a control mechanism to regulate the liquor industry. “We need industries for economic growth. However, there should be some controlling mechanism for liquor factories,” Suraj Vaidya, president of FNCCI, told Republica.
According to the Nepal Liquor Manufacturers´ Association (NELMA), the country imports liquors worth Rs 4 billion annually. Domestic liquor production is worth around Rs 11 billion, according to the association.

18-month time frame for PDA talks

The government has endorsed a project negotiation agreement (PNA) that would set a standard time frame for the completion of project development agreement (PDA) negotiations for hydropower projects of above 500 megawatts.
The government has developed a PNA template that envisages completing PDA negotiations with power developers within a time frame of one and half years from the signing of the PNA. "A meeting of the board of directors of the Investment Board of Nepal (IBN) has already endorsed the PNA template," a knowledgeable source told Republica.
According to the source, IBN, which drafted the template, has forwarded it to three major power developers engaged in the development of four mega hydropower projects with a total installation capacity of 3,050 megawatts.
"The developers have so far not made any comment on the PNA template that IBN has shared with them for their constructive suggestions if any," the source disclosed. The power developers that have received the template are Indian power developers GMR and Sutlej Jal Vidyut Nigam, and SN Power, a Norwegian firm.
GMR is engaged in the development of the 900 MW Upper Karnali and 600 MW Marsyangdi, and Sutlej is developing the 900 MW Arun III.
Similarly, SN Power is developing the 650 MW Tamakoshi III project.
IBN was formed more than a year ago to give impetus to the development of mega projects and it is also working on the finalization of a PDA template.
According to the PNA template, PDA negotiations with developers would be automatically terminated if they cannot be completed within one and half years from the date of signing of the PNA.
The PNA template that is on the verge of enforcement will end the proclivity to drag out the PDA negotiations for mega hydropower projects. According to the source, IBN developed the PNA template with technical assistance from the Centre for Inclusive Growth (CIG), a domestic organization that works in policy dialogues.
Confirming the development, a high ranking official at IBN said that the PNA was mainly to bring developers within the time frame for sealing a PDA. "The PNA template is also meant to pass the ownership of the project to the developers," said the official.
IBN is in the process of forming a PDA negotiations team, having received a mandate from the IBN board of directors chaired by Prime Minister Dr Babu Ram Bhattarai.

Govt mulls US$ 60m assistance from World Bank for solar plant

Amid acute power shortage in the country, the government is preparing to seek US$ 60 million in assistance from the World Bank to develop a 20 megawatts solar energy plant.
“The Nepal Electricity Authority (NEA) has already forwarded the proposal to the Ministry of Energy (MoE) and has asked to forward it to the World Bank through the Ministry of Finance (MoF),” an official at MoE told Republica.
Under its load-shedding reduction plan for winter, the government had mulled construction of a 20 megawatts solar energy plant. The World Bank has already agreed in principle to provide the amount for the project.
“We will forward the proposal to the World Bank once we receive it from the energy ministry,” said Joint Secretary at the finance ministry Madhu Kumar Marasini. “This project is too important and we will try our best to implement it as soon as possible.” According to the proposal, the solar energy plant in the country will be able to reduce load-shedding by four to five hours per day.
“This solar energy plant will be our first priority at the moment as it would relieve people from long hours of power cut,” said Marasini. The project also includes construction of 132 kV transmission line, said an official at the energy ministry.
The government, in its load shedding reduction plan had planned to supply power to government offices from the solar plant. “The NEA in collaboration with other partners will develop infrastructure for supplying electricity generated by the solar plant to hospitals, Singh Durbar, the president´s office and Pashupati Area Development Trust, among other areas,” reads the plan. “The government will also establish a separate entity for development and management of solar energy in the country.”
However, an official at MoF expressed doubts if the solar plant would be developed on time. “Given the bureaucratic inefficiency, I am not hopeful that NEA and the energy ministry would be able to develop the project on time even if the World Bank provides assistance,” said the official.

Nepal woos Israeli investors

Israeli businessmen have shown interest to invest in small scale enterprises in Nepal.
“Israeli investors are impressed with our presentation about the investment opportunities in Nepal. They inquired with us about investment potentialities in small scale enterprises," Mukunda Prasad Poudel, joint secretary at the Investment Board of Nepal (IBN) Secretariat, said.
Poudel made the presentation to around six dozen Israeli businessmen who were present at an interaction on ´Investment and Business Opportunities: Doing Business in Nepal´ held in Tel Aviv last week.
He also said some Israeli entrepreneurs have showed interest to investment in the industries that produce turbine for small hydropower projects.
The interaction, which was organized jointly by the Embassy of Nepal in Tel Aviv and the Federation of Israeli Chambers of Commerce (FICC), focused on investment opportunities and existing legal provision in Nepal.
According to the Department of Industry (DoI), Nepal has received a total of Rs 681 million in foreign direct investment (FDI) from Israel as at fiscal year 2010/11. Statistics compiled by the department shows that existing 12 Israeli joint ventures in Nepal have generated more than 400 in Nepal.
Existing as well as potential investors had participated at the interaction. During the interaction, Israeli businesspeople inquired about legal provisions in Nepal.

FNCCI appeals against banda, strikes

Federation of Nepalese Chambers of Commerce and Industry (FNCCI), an apex body of the private sector, has appealed all the political parties and their sister organizations not to organize banda or any other protest programs next week.
Issuing a press statement, FNCCI has requested all the political parties to cooperate with to make 2nd International Trade Fair a grand success. “We request political parties to withdraw protest programs, if they have any, during 8th to 12th of this month considering the event,” the release added.
The fair will showcase different domestic products aiming to promote them in the international market. It is expected to draw footfall of more than 200,000.
"The fair has been designed to promote Nepali products and increase the access of Nepali businessmen in the international market," the release said, adding, "Protest programs or any forms of strike will disturb the fair. That is why we are requesting all the political parties, including different groups in the society, to make optimum use of this event.”
According to FNCCI, businessmen from countries like Bangladesh, Bhutan, China, India, Pakistan and USA will be participating in the fair. FNCCI is targeting transactions of around Rs 150 million during the fair.
The event will also provide a forum for different business to business meetings among investors from different countries. “The fair will focus on luring investment in areas such as hydropower, agriculture, tourism and services among others," said the release.
FNCCI had hosted 1st International Trade Fair in Kathmandu last year.

Economists warn of economic gloom

Economic experts have warned that lengthening political instability could affect country´s economic development in the coming years.
Highlighting the unwillingness of political parties toward resolving the current political stalemate, Prof Dr Bishwambher Pyakuryal said that the country would enter into more uncomfortable situation in the future. “The political parties are failing to address the current political as well economic problems," Pyakuryal said.
"Most of the macroeconomic indicators are performing negatively and the monetary policy of the country has become non-functional to an extent." He also said the country was facing double-digit inflation pressure.
Addressing an interaction on “Diagnosing Nepal´s Macroeconomic Constraints” here on Friday, Pyakuryal urged political parties to be more sincere toward country´s situation.
Another economist Keshav Acharya said that country´s economy was alarming. “The monetary policy should be made stronger to address inflation," Acharya said. "The fiscal policy also has some problems. We have to synchronize the fiscal and monetary policies in order to exit the current situation."
The country´s economic indicators are performing poorly, as per the latest review report of the Nepal Rastra Bank. The mid-term budget review has brought down growth forecast for the current fiscal year to 4.1 percent from earlier forecast of 5.3 percent.
During the interactions, the economists discussed on problems such as low capital expenditure, unfavorable condition for investment and acute power shortage that are impeding the country´s growth rate.
"We have to focus on maintaining balance in the economy to avoid future disasters," Prithvi Raj Ligal, former vice-chairperson of the National Planning Commission, said. “We should have an effective monetary policy to drive the country´s economy on the right path."
Saying that the economy is suffering due to some structural problems, Ligal said the government has to focus on resolving those problems.

NEA laying grounds to sign PPA with super-six projects

Amid complaints from developers and the government, the Nepal Electricity Authority (NEA) has said it is preparing grounds for signing power purchase agreement (PPA) with “super six” hydropower projects.
“We are working to identify ways to develop transmission lines for these projects,” Chief Secretary Lila Mani Paudel, who also chairs the board of directors of NEA, told Republica on Wednesday.
The six projects, including 16 megawatts Singiti, 24.1 megawatts Khare, 23.5 megawatts Upper Solu, 82 megawatts Lower Solu, 14.9 megawatts Maya Khola and 50 megawatts Mewa, are awaiting PPA though they are all set to start construction.
“We are trying to build transmission lines for the projects before signing the PPA as it would be difficult for government to compensate the developers if NEA fails to lay transmission lines by the time the projects are completed,” Paudel said.
The government had pledged to develop transmission lines while awarding the projects to the developers. The developers had paid a total of Rs 450 million as license fees to the government.
The Ministry of Energy (MoE) has been pressing the NEA to sign PPA with these projects. “We are consistently pursuing NEA to sign PPA with the project developers,” an official at the Ministry said.
“We will soon communicate with the developers for signing the PPA,” Paudel said. “But the PPA would be signed only after finalizing the issue of transmission lines for these projects."
The developers of these projects had completed detailed project report (DPR) around one-and-a-half years ago. Four of the projects were supposed to be completed by 2014 and the remaining two by 2015.
According to the Department of Electricity Development (DoED), the government had provided power generation licenses to the developers of these projects around three years ago. “PPA would be signed with these projects once NEA would finalize the issue of laying transmission lines,” Poudel said.

Money generated from sales of Hetauda

The government has decided to invest the money generated from sales of assets of Hetauda Textiles Factory (HTF) in the Industrial Estate Management Limited (IEML) -- a company which manages all the industrial estates in the country.
A meeting of the council of ministers (cabinet) took the decision to this effect.
The government expects to raise a total of Rs 363.64 million from sales of assets of the state-owned textile factory, liquidation process of which began in 2009.
"Of this, a total of Rs 81.22 million will come from sales of building and physical infrastructure. This amount will be invested as share capital in the IEML," reads the cabinet meeting minute.
According to the cabinet decision, another Rs 81.42 million will be generated from sales of plants and machineries.
Of this amount, Rs 11.42 million will be extended as credit to the IEML at 5 percent interest rate.
Similarly, the government has also decided to invest all the amount that comes from sales of 256 ropanis of land belonging to Hetauda Textile in the IEML. Since the land has been valuated at Rs 201 million, all this money will also be injected in the IMEL.
"We have written a letter to the IMEL asking it to submit a proposal on implementing the cabinet decision," said an official at the Ministry of Industry (MoI). "The process to sell land and transfer machinery and plants will begin once the IMEL submits a proposal to the ministry."
The IMEL currently owns a total of 5,128 ropanis of land in different parts of the country such as Balaju, Patan, Hetauda, Dhanusha, Nepalgunj, Pokhara, Butwal, Bhaktapur, Biratnagar, Dhankuta and Saptari.
A total of 11 industrial estates houses more than 600 factories that employ over 11,100 people. Investment of more than Rs 13 billion have been made in these factories.
These industrial estates were primarily set up to make efficient use of available resources and extend better services and facilities to industries set up in the vicinity of one another.
Hetauda Textiles Factory was closed around 12 years ago after it started generating losses continuously due to its failure to compete with imported textiles, mainly from India. The factory used to consume around 1,200 tons of cotton and was employing about 1,200 prior to its closure.

ADB provides $150m loan to build hydropower project

The Asian Development Bank (ADB) is lending $150 million to the Nepal government for development of a $500-million hydropower plant with a 140MW capacity.
The hydropower plant, to be located around 150 kilometers west of Kathmandu on the Seti River in Tanahu district, will generate electricity round the year, says an ADB statement.
“To ensure steady supply even during the dry winter months of November through April, the plant will be fed from a 7.26 sq km reservoir, making it Nepal´s first major hydropower plant with water storage capacity and a sediment flushing system,” the statement further says.
Around 85 percent of Nepal´s existing plants use the run of the river technology to generate power, which makes for lower output during the dry season.
“In addition to building the plant and a transmission system, the project will also provide at least 17,636 homes in the area of the hydropower plant with direct connections to the national power grid,” says the statement. Currently, only around one-third of Nepali households are connected to the electricity distribution grid, with connection rates much lower in rural areas.
The entire project will be co-funded by the ADB and the Japan International Cooperation Agency, the European Investment Bank, and the Abu Dhabi Fund for Development.
“Nepal has an energy crisis, and this is affecting badly economic prospects,” an ADB statement quotes Yongping Zhai, director, Energy Division in ADB´s South Asia Department, as saying. “This energy project is a means to stop this crisis.”
Electricity demand is growing at 10 percent a year in the country, but lack of investment means supplies are not keeping up, says the statement. “Blackouts of up to 18 hours a day in the dry season are common, even in the capital, Kathmandu. This forces businesses and households to use expensive and polluting diesel generators.”
Nepal´s mountain ranges and many swiftly flowing rivers endow it with huge hydropower resources. However, the country´s total installed power generation capacity is just 700 MW - largely from hydropower. This represents only 1.5 percent of Nepal´s hydropower potential.
“The hydropower plant´s construction will follow best international practice. ADB will ensure that the appropriate social and environmental rules, procedures and guidelines are adhered to,” says the statement.
“The project company, Tanahu Hydropower Limited, will invest in health and education programs as well as income and livelihood skills training for the local communities. The ADB and its partners have carried out climate change impact modeling work on the project, and will do more assessments prior to its construction.”

Govt warns of scrapping 600 survey license applications

The government has warned of scrapping a total of 600 applications for survey license of hydropower projects, including six large scale projects, if the applicants fail to submit necessary documents and application fee on time.
The Department of Electricity Development (DoED) has issued a notice to this effect asking applicants to submit the necessary documents along with the application fee within the next 35 days (starting from February 22).
“The notice is for all applicants who have sought survey license,” said Gokarna Raj Pantha, senior divisional engineer at DoED. “DoED can not process the applications without receiving all the necessary documents and fee.”
According to Pantha, applicants of big hydropower projects such as the 660 megawatts Kali Gandaki II Storage Project, 600 megawatts Seti Storage Project, 500 megawatts Tamor Khola Hydropower project, 425 megawatts Dudhkoshi Hydropower Project, 340 megawatts Uttar Ganga Storage Project and 360 megawatts Mangri Gamgadhi Hydropower Project.
The government has decided to cancel the old applications and seek new applications if the applicants fail to deposit the fee and submit the necessary documents on time.
“The companies have to pay the revised application fee,” said Pantha. The government had revised application fee for all types of hydropower projects in October 2012.
SBS Holding Private Limited, a domestic firm, has applied for the survey license of the Seti Storage Project is based in Doti, said Pantha. Similarly, Hills Dell Group Company has applied for survey license of Tamor Khola Project, Lenus Power Limited for Dudhkoshi, Chilime for Uttar Ganga and Lanco Infratech Limited, an Indian firm, for Mangri Gamgadhi Hydropower Project. “We will scrap the applications if the companies do not deposit survey license fees on time,” Pantha said.
The government took the decision to scrap applications as the companies have not contacted DoED for five years after applying for survey license. “Most of the companies had applied for survey license in 2005 and 2006,” Pantha said.
The decision to issue the notice to applicants was taken by the Ministry of Energy, said Pantha.

Govt preparing to settle dues of 193 workers

As a part of reviving the Birgunj Sugar Factory, the government is preparing to settle outstanding dues of 193 workers who refused golden handshake offer made by the factory that shut its operations about a decade ago.
“The newly formed board of directors (BoD) of the factory has been holding discussions on ways to settle dues of those 193 staff members,” Joint Secretary Khum Raj Punjali, chief of Corporation Coordination Division under Ministry of Finance, said.
The government had formed a seven-member BoD at the factory in the first week of January, asking it to do necessary groundwork for bringing the state-owned factory back into operation.
“It is necessary to settle dues of 193 workers first,” Punjali told Republica on Sunday.
Punjali also said the workers are flexible this time and willing to let the government move ahead with its plan to hand over the factory to the private sector.
For that to happen, the BoD has to devise a plan to get rid of 193 workers and submit it to Ministry of Industry (MoI). "We will approve the plan once MoI forward it to us,” Punjali said, adding that the BoD at present is holding talks at different level to settle the issue."
The factory shut operations nine years ago after it started making losses due to problems like over-staffing and perennial shortage of raw materials. The government had decided to liquidate the factory nine years ago, but it had not materialized due to pressure from local political leaders.
MoI took the initiative to revive the factory after Public Enterprises (PE) Board gave it a go ahead to hand the factory over to the private sector so that no liability comes to the government.
PE Board, however, had suggested the government to manage the 193 workers first.
“The government must settle dues that it owes to 193 workers before handing the factory over to the private sector,” Bimal Wagle, chairman of the PE board said.
According to MoF, the factory had 1,053 persons in its payroll in 2002/03.
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.

31 project proposals valued at Rs 103b land at NIB

The Nepal Investment Board (NIB), a high-level government entity for facilitating the implementation of mega projects and organising the celebration of Investment Year 2012/13, has received a total of 31 new project proposals valued at Rs 103 billion from the domestic private sector.
Different groups in the domestic private sector submitted business plans after NIB formally sought project proposals in early December, 2012. According to the NIB secretariat, the private sector has submitted 13 project proposals in the agricultural sector, two in energy, and six in health and education.
Similarly, the NIB secretariat has received two project proposals in the hydropower sector, one in information and technology, one in infrastructure and six in the tourism sector.
"We are now assessing the project proposals submitted by the domestic private sector," Radesh Pant, chief executive officer at NIB, said on Thursday.
Elaborating on the process of project evaluation, Pant said that NIB would focus mainly on the financial viability of the projects and the economic returns from them. "Local development from the project and its benefit to the people will be one of the major yardsticks for assessing a project," Pant said.
The government had announced it was bringing forward a total of 50 projects of strategic importance for the country. The NIB secretariat made a public announcement in early December, 2012 to submit the project proposals.
Additionally, 20 different projects have been developed in the tourism sector in collaboration with the International Finance Corporation (IFC), a member of the World Bank Group, and tourism entrepreneurs.
"The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has developed 20 different project proposals," an official at FNCCI said on condition of anonymity. "FNCCI also developed 10 different agricultural business plans."
NIB, which is already overseeing 14 mega projects including five hydropower projects, has unveiled a plan to identify viable projects from the total number of proposals submitted and move them forward for implementation jointly with the private sector.
The private sector, that first came up with the idea of celebrating Investment Year in the country, has urged NIB to identify strategically important projects and prioritize them.
"NIB is now capacitated to take development activities forward," Suraj Vaidya, president of FNCCI, said. "It has to make clear why a particular project is necessary in the country."
Vaidya strongly opposed the government´s plan to develop international airports in four cities, namely, Pokhara, Bhairawa and Nijghad as well as Tribhuvan International Airport (TIA) in Kathmandu.
"What is the rationale of developing four international airports that are just 15 to 25 minutes from Kathmandu?" said Vaidya. "We have to act strategically while making such a huge investment."

'Remove screening process for FDI approval'

Global experts have urged the government to remove procedural hurdles in order to lure foreign direct investment to the country. They have also asked that foreign investment be allowed to flow without undergoing a screening process for approval.
Highlighting the prospects that the country has, experts have suggested that the government ensure a basic investment friendly environment.
"The government has to create an environment wherein investors can feel secure and be certain of good returns," Roberto Echandi, the global lead at the World Bank Group, said at a workshop in Kathmandu on Thursday.
On the government´s recent decision to increase the minimum threshold for foreign investment, Echandi said that investment inflow goes up only when the minimum investment requirements are less complicated. The government has increased the minimum threshold from US$ 26,000 to US$ 50,000 for foreign investment.
"The government should impose screening in strategically important sectors," Echandi said. Imposing screening for foreign investment in all sectors, he said, might turn off investors from coming into the country with new investment. "Nepal should also focus on luring foreign investment through regional integration and trade," Echandi said.
The workshop on ´making investment competitiveness for Nepal a reality´ also stressed on identifying areas that have competitive edges.
"Having an investment policy that promotes and protects foreign investment is important for any country to attract foreign investors," Echandi said, stressing the government´s role in taking these activities ahead. "Investment policy also should take care of developing harmonious relationships among stakeholders."
The workshop that was jointly organized by International Finance Corporation (IFC), a member of the World Bank Group, and Nepal Investment Board (NIB) also dwelled on ways to promote investment in the country.
"The government has to work on attracting all kinds of foreign investment," Echandi said, elaborating that there were mainly three kinds of foreign investment: market seeking, natural resources seeking and efficiency seeking.
Meanwhile, government officials briefed about activities taking place to take forward the reform process to lure investment.
"The government is working on revising laws and regulations to minimize the approval process," Radesh Pant, the chief executive officer of the NIB, said at the workshop.
Expressing optimism, FNCCI President Suraj Vaidya said the government should prioritize the projects that are strategically important for national development. "Our efforts should focus on those projects," he said.

NIB to tailor PDAs for four hydel projects

The government has finally cleared the way to tailor individual project development agreements (PDA) with three international power developers for developing four mega hydropower projects with collective generation capacity of 3,050 megawatts.
A meeting of the board of directors (BoD) of the Nepal Investment Board (NIB) took such a decision on Wednesday and delegated authority to the NIB secretariat to form a negotiation team to discuss the projects with the developers, namely GMR Energy, Sutlej Jal Vidyut Nigam and SN Power.
The Sutlej, Indian state-owned developer is engaged in development of the 900 MW Arun III; GMR, another Indian company, is engaged in two projects namely, 900 MW Upper Karnali and 600 MW Upper Marsyangdi, while SN Power, a Norwegian firm, is developing 650 MW Tamakoshi Hydropower Project.
"The negotiation with the developers will go on fast track once the NIB secretariat forms a team to tailor PDAs for each of the projects," Radesh Pant, chief executive officer of the NIB told Republica. "The government has also formed a three-member coordination committee to oversee the negotiation of the secretariat with the developers." Dipendra Bahadur Kshetry, vice chairperson of the National Planning Commission (NPC) and Leela Mani Paudel, chief secretary, and Pant are in the committee.
According to Pant, the PDA negotiations with each developer will be expedited on the basis of the PDA template developed by the NIB. "NIB has even appointed Lahmeyer International, an engineering firm, to review the four projects," reads a release issued after the meeting. The World Bank has provided assistance to the NIB to hire Lahmeyer International.
However, the NIB has been facing resistance from the Ministry of Energy (MoE) which is openly opposed to the government´s handing over of the four mega projects to NIB. MoE had a few days ago written to the Office of the Prime Minister and Council of Minister (OPMCM) requesting the government to rethink its move saying NIB lacks necessary manpower and expertise to hand such projects.
Additionally, the meeting of the BoD has given a go ahead to the NIB secretariat to carry out work on the detailed project report (DPR) of the Kathmandu Metro Railway (KMR). After getting clearance from the BoD, NIB will soon finalize terms of reference with Nepal Metro Private Limited (NMPL) to expedite the DPR preparation work for the metro railway.
The Ministry of Physical Planning, Works and Transport Management (MoPPWTM) had conducted the feasibility study of the project by outsourcing some domestic and South Korean firms.
The NIB that came into existence more than a year ago to facilitate the implementation of mega projects on fast track mode has also got a nod from the BoD to conduct feasibility study of the chemical fertilizer plant. "The NIB has sought financial support from the Ministry of Finance (MoF) to conduct feasibility study for the plant," an official told Republica.

Maitighar-Tinkune road to complete by June

The government has set the target of completing the most expensive Maitighar-Tinkune road section in Kathmandu by the end of mid-June.
“It is the most expensive road section in the Valley in terms of cost,” Tulasi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) told Republica.
The government has allocated Rs 450 million for the expansion of the 3-km road section. “Unlike in other parts of the valley, this section would require more time as there are not only electricity poles but also trolley bus poles that have to be removed,” Sitaula said.
The road section will also have two bridges - the Dhobikhola Bridge in Bijulibazaar and Bagmati Bridge in Tinkune. “The eight-lane will be completed on time as the design of two bridges along the road section has already been prepared,” said Sitaula.

In a bid to complete the road section on time, the Department of Roads (DoR) has sought request for proposal (RFP) from eight contractors. “We will select two contractors from among them,” said Shyam Kharel, chief of the Kathmandu Valley Road Improvement Project, said.
According to Kharel, the DoR has already removed 80 trolley bus poles out of the total 160 poles in the road section. “Nepal Electricity Authority (NEA) has assured us that it would complete installation of new poles by the end of this month and then old poles will be removed,” Kharel added.
The road section after expansion will have footpath for pedestrians. Kharel further informed that gravelling in some of the places has already started. “We are hoping that the construction of the bridges will kick off within one-and-a-half month,” said Kharel.
However, the government, for the time being has shelved its plan to build flyovers at New Baneshwar. “The construction of flyovers in New Baneshwar will start after the expansion of the road section,” Sitaula said. “The road section would be developed in a way that flyovers can be built at Baneswar in future.”
The government had launched the road expansion drive in order to minimize traffic congestion in the Kathmandu Valley. The government is working on expansion of more than 125 road sections with a total length of 200 km in the Valley.

Govt bars NIB from handling mega hydropower projects

In yet another case of inconsistent decision making, the government has barred Nepal Investment Board (NIB) from facilitating the implementation of mega hydropower projects (above 500 MW) by attracting foreign investment.
Although NIB was formed to implement mega projects in a fast track mode, the cabinet meeting on Monday decided to bar NIB from facilitating implementation of those projects which is an explicit encroachment of NIB Act.
“The cabinet meeting decided against delegating authority to NIB to facilitate the implementation of four hydropower projects -- namely Arun III (900 MW), Tamakoshi III (650 MW), Upper Karnali (900 MW) and Upper Marshyangdi (600 MW),” Minister for Cooperatives and Poverty Alleviation Ek Nath Dhakal told Republica. “The meeting also denied to hand over Kathmandu-Terai fast Track project to NIB.”
The NIB Secretariat was in close communication with developers of the those projects after it received a mandate from its board of directors, which is chaired by Prime Minister Dr Babu Ram Bhattarai, in May 2012 to ink project development agreement (PDA) with them.
"The cabinet meeting took the decision to keep the authority to facilitate implementation of the mega projects at the respective ministries as per our suggestions," Dhakal said.
The Ministry of Energy (MoE) that was handling the project before NIB came into being more than a year ago had written to the Office of the Prime Minister and Council of Minister (OPMCM) a week ago, asking government not to hand over the projects to NIB. Saying that NIB lacks institutional capacity and resources to facilitate implementation of mega projects, MoE had requested the OPMCM to rethink before handing over mega projects to the NIB.
The NIB Secretariat had submitted a proposal to the cabinet to get authority to carry out the projects smoothly after it felt resistance in implementation from the line ministries.
The government on Monday authorized NIB to facilitate implementation of seven projects including Waste Management project, Chemical Fertilizer project, Infrastructure Development Bank project and West Seti Hydropower (750 MW).
“NIB had sought authority to implement 14 projects,” said Dhakal.
Meanwhile, the government´s inconsistent decision making has put the spirit of NIB in jeopardy.
“There is no point establishing a high-level body if the government doesn´t want to separate strategically important projects from our rotten bureaucracy,” an official at OPMCM said preferring anonymity.
Ironically, PM Bhattarai chairs the board of directors of NIB and heads the Ministry of Energy. While forming NIB, PM Bhattarai had announced to bring US$ 1 billion worth of foreign direct investment (FDI).

Govt to finalize ToR for soft loan from EIB

The government is holding negotiations with the European Investment Bank (EIB) next week to finalize terms and conditions for soft loan of US$ 70 million for the construction of 140 megawatts Tanahun Hydropower Project.
“A team from EIB is scheduled to visit Nepal next week to finalize the terms and conditions for the soft loan,” joint secretary at the Ministry of Finance (MoF) Madhu Marasini, who also heads the International Economic Cooperation Coordination Division (IECCD), told Republica.
The government has already arranged a total of US$ 300 million soft loan from Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA) for development of the project. “We will seek an additional US$ 70 million from EIB in the meeting scheduled for next week," Marasini said.
The government has already finalized terms and conditions for the soft loan with ADB and JICA. “The terms and conditions with EIB will be different from that of ADB and JICA,” said an official at the Ministry of Energy (MoE).
ADB has agreed to provide soft loan at 1.5 percent interest with 30 years of maturity period. Similarly, JICA has agreed to provide soft loan at 0.01 percent interest with 40 years of maturity period.
“The meeting with EIB team next week will dwell on finalizing interest rate and maturity period,” the official said. The second reservoir type hydropower project after Kulekhani will be developed by Nepal Electricity Authority (NEA) after the government arranges fund for the project.
Meanwhile, the government is also vying for a loan of US$ 30 million from Abu Dhabi Fund for Development (ADFD) for the development of the project. “ADFD has expressed interest in funding the Tanahun Hydropower Project. But any meeting with DFD has not been fixed so far,” said the official.
ADB, which is a lead funding partner, had provided US$ 25 million in grant assistance to prepare the detailed report (DPR) of the project. “The project design has been completed,” said project Chief Mahesh Prasad Acharya.
If everything goes as planned, the national pride project based in Bayas municipality of the Tanahu will start generating power by 2020. According to officials engaged in the negotiation process, ADB and JICA both also have taken Tanahun Hydro as a “prestige project”.

Khatiwada writes note of dissent on IPB decision

Nepal Rastra Bank Governor Dr Yuba Raj Khatiwada has expressed serious objection over the practice of bypassing Industrial Promotion Board (IPB) by Minister for Industry Anil Kumar Jha.
Dr Khatiwada has written note of dissent on the decision to license new liquor companies taken by 198th meeting of the IPB held about a month ago.
“I can´t agree with the decisions that have been taken by the IPB," Khatiwada, who is also the member of the board, has written at the bottom of the meeting minutes file. “There should be clarity on the provisions."
Khatiwada has further said that IPB can´t endorse everything that the ministry does. "It should be clear whether the IPB is to endorse everything that the ministry does or it has power to say no to each step that the ministry takes," Khatiwada has written in his note of dissent.
The government had lifted 12-year long ban on issuing licenses for liquor factories a couple of months ago. But after issuing licenses to some factories, MoI had stopped licensing processing, stating that it needs to review the policy.
Sources at the Ministry of Industry (MoI) and Department of Industry (DoI) have revealed that the Minister Jha is involved in some wrongdoings while issuing licenses to new factories.
Minister Jha couldn´t be contacted for comments despite repeated attempts of Republica.
According to officials close to the development, Minister Jha has violated the rules of rectifying decisions by the IPB meeting. “The IPB, which is supposed to endorse the decisions before they are implemented, has just started getting information about the ministry´s decisions,” a source said.
Another source said Minsiter Jha put a ban on licensing process after a handful of companies got the licenses.
The government, in October 2001, had decided to stop issuing new licenses to the new liquor factories in the country following pressure from the then CPN (Maoist). Ironically, the ban was lifted by the government headed by UCPN (Maoist) a couple of months ago.
According to Nepal Liquor Manufacturers´ Association (NELMA), the country imports liquors worth Rs 4 billion annually. Domestic companies produce liquors worth around Rs 11 billion a year.

PDA template only for export-oriented projects: NIB

The Office of Nepal Investment Board (ONIB) has disclosed that the project development agreement (PDA) template that is on the verge of finalization is only meant for export-oriented hydropower projects.
"The PDA template that is under discussion is not for projects that are for domestic consumption purposes," said Radhesh Pant, chief executive officer at ONIB. "We will soon develop a different template for that purpose."
Interacting with media persons at a program held on Friday, Pant said that ONIB was working towards tailoring PDAs with individual power developers for four mega hydropower projects that have a total installation capacity of 3,050 megawatt.
The projects on hand for PDA negotiations with developers include the 900 megawatts Arun III, 650 MW Tamakoshi III, 900 MW Upper Karnali and 600 MW Upper Marsyangdi.
ONIB has been holding regular discussions with the power developers who are engaged in the development of the above-mentioned four export-oriented mega projects.
GMR is engaged in the development of two projects, namely Upper Karnali and Upper Marsyangdi. Sulej Jal Vidyut Nigam is developing Arun III and SN Power has Tamakoshi III in its bag. Sutlej and GMR are Indian companies while SN Power is a Norwegian power developer.
ONIB, which came into existence more than a year ago to carry out the implementation of mega projects on a fast-track mode, doesn´t have any PDA template for the 750 MW West Seti Hydropower project. West Seti is the only project that is meant for domestic consumption.
"We will soon develop a PDA template for West Seti," Pant added. A Chinese company, Three Gorges, is engaged in the development of West Seti. Project evaluation for West Seti will be completed in the next few weeks, according to Pant.
Meanwhile, George Davies, director of hydro cluster at the Centre for Inclusive Growth (CIG), shed light on the detailed structure of the PDA. He skipped any explanation of how exactly the PDA template now under discussion protects the national interest of Nepal. "The PDA has provisions that guard the country´s interests," Davies had said in his presentation.
Davies made it clear that the risk was borne by the developer in most cases.
The interaction program, that was basically organized to make clear what the PDA is and how it protects the national interest, also touched base on other projects, including Chemical Fertilizer Plant, Nijghad Second International Airport and Solid Waste Management, among others.
"We want the best of best international developers to come to Nepal," Pant said, highlighting the importance of mature and detailed homework before actually signing a deal for project development.

9-point election govt proposal draws flak from private sector

The widely criticized nine-point draft proposal to form an election-government under the leadership of the sitting chief justice has also drawn flak from the business community.
"We have serious objections over the move by major political parties as the proposal does not clearly incorporate issues of economic development," said Suraj Vaidya, the president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
Major political parties have been holding a series of meetings to lay grounds for constituting an election government under the premiership of sitting chief justice Khil Raj Regmi.
Vaidya, who was addressing a press meet on Thursday in the capital, also voiced concerns over the indifference of political parties toward the worsening economic situation of the country.
Different business associations have echoed the voice of FNCCI, the apex organization of the Nepali private sector.
Nepal Chambers of Commerce, Federation of Contractors´ Association of Nepal (FCAN), Confederation of Nepalese Industries (CNI) and Nepal Bankers´ Association, among others have expressed their dissatisfaction over the fresh political development.
"The private sector is intimidated by forceful donation demands of the political parties and their sister organizations. Amid this disappointing situation, the fresh step taken by the political parties is irresponsible," Bhaskar Raj Rajkarnikar, the senior vice-president of the FNCCI, said.
Urging political parties to be serious about the country´s deteriorating economic situation, FCAN President Jaya Ram Lamichhane stressed the need for political parties to move ahead with preparations for an election that would lay grounds for economic development.
Vaidya also said that keeping the private sector intimidated might further devastate country´s condition.
Stressing the need for formulating a common minimum economic agenda for the country, Vaidya also said the political parties should join hands with the private sector to increase the pace of economic development.
"We have been requesting the political parties to agree on common minimum economic agendas and bring the country´s a budget on time no matter which party is in the government. But this is not happening and making us more worried about its possible negative impact in the economy in the coming fiscal year," said Vaidya.

Govt starts negotiation with EIB

The government on Wednesday formally started negotiations with the European Investment Bank (EIB) to finalize the terms and condition for US$ 70 million in loan from EIB to develop the 140 megawatts Tanahun Hydroelectric project.
“A two-member team from EIB has arrived in the capital for negotiations,” Chief of the Tanahun Hydropower Project Mahesh Prasad Acharya told Republica. This is the first time the government has sought loan from EIB.
The EIB team has offered two options -- floating and fixed interest rates for the loan, said Acharya, adding, “We have to decide which one to opt for.”
According to Acharya, the floating interest rate will fluctuate as per the global economy´s ups and downs whereas fixed interest rate will be stable once it is decided.
“However, the interest rate will be fixed when we actually accept loan from EIB,” he said.
EIB is the third funding partner to invest in the Tanahun Hydropower Project. The government has already finalized terms and condition with the Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA) for loans worth US$ 170 million and US$ 150 million respectively.
“The meeting with EIB officials will continue for the next couple of days,” said Acharya, adding that the talks were moving ahead positively.
The government, after finalizing the terms and conditions with EIB for loan, will hold negotiations with the Abu Dhabi Fund for Development (ADFD) for loan worth US$ 30 million.
As of now, the government is expecting to get loan from EIB at an interest rate of less than 3 percent. “Issues such as actual interest rate and maturity period for loan are yet to be negotiated,” Acharya said.
JICA has agreed to provide soft loan at 0.01 percent interest with 40 years of maturity period. “Given the recent developments, the project would start on time,” said Acharya.
The national pride project located in Bayas municipality of Tanahu will start generating electricity by 2020 if the construction of the project begins in 2014. According to officials involved in the negotiations, ADB and JICA have also taken Tanahun Hydropower Project as a “prestige project”.

Govt devising plan to pay off 893 workers

The government is taking a fresh step to send ailing Janakpur Cigarette Factory (JCF) into liquidation by settling dues of 893 employees who have asked for a concrete pay off plan.
In this regard, the government is soon forming a committee comprising representatives from the government, employees and factory management to study financial situation of the struggling state-owned cigarette producer.
Though the government decided to liquidate JCF last year, it hasn´t materialized in the absence of a concrete pay off plan for workers.
“We are trying to address the demand for voluntary retirement scheme put forth by the employees by forming a committee which will stake stock of assets and liabilities of JCF along with outstanding dues that the factory owes to the workers,” Khum Raj Punjali, joint secretary at the Ministry of Finance (MoF), told Republica.
The Corporation and Coordination Division (CCD) of MoF, which is headed by Punjali, on Tuesday proposed to form a committee to do necessary homework for settling workers´ dues and other necessary works.
"The committee will study assets and liabilities of JCF and calculate fund required to pay off 893 workers,” Punjali added.
The government had announced to liquidate the factory through its Action Plan on Good governance, 2012.
According to Punjali, around Rs 2 billion would be required to pay off the workers. It would cover gratuity, medical and leave benefits.
The employees had originally approached the Ministry of Industry (MoI), seeking golden handshake offer. Later, they had forwarded their demand to the finance ministry.
“Close coordination between the two ministries would be necessary to complete the liquidation process,” said Punjali.
Established in 1965 with the support from the then Soviet Union, the factory had once dominated domestic market with popular brands like Yak, Gaida and Deurali. It, however, lost its market share after its monopoly in the market ended with the entry of privately-run Surya Tobacco Company.
The company reported an accumulated loss of Rs 170.80 million until 2010/11.
Meanwhile, workers, who have been knocking the doors of officials at both the ministries, expressed dissatisfaction over the government apathy toward their demands.
"We are no longer interested in working for JFC. That is why we have been pushing for golden handshake offer,” Arjun Chaulagain, a representative of JCF workers, told Republica.

3 projects get power generation licenses

The government has awarded power generation licenses to three hydropower projects with total generation capacity of 36.36 megawatts. The promoters of the projects have been asked to complete their financial closures for project development within a year.
According to the Department of Electricity Development (DoED), 30 MW Nyadi Hydropower Project, 4.36 MW Tungun Thosne Khola Hydropower Project and 2 MW Khani Khola Hydropower Project were granted the licenses last week."The developers will have to show their financial closures within a year from now," Gokarna Raj Pantha, senior divisional engineer at the DoED, told Republica.
According to Pantha, Nyadi Hydropower Pvt. Ltd -- a subsidiary of Butwal Power Company -- has received generation license to develop Nyadi Khola Hydropower Project. "The estimated construction cost of Nyadi Khola project is Rs 6 billion," Pantha informed.
The run-of-the-river project based in Bahundanda, Lamjung is projected to be completed within four years from the start of construction. "The developers have submitted the letters of intent from the banks as their financial sources," Pantha said.
The developer will have to construct 7-km transmission line of 132 kV capacity to connect the project with the national grid. "The power generated from the Nyadi Khola will have to be connected to the substation at Khudi," Pantha said. The project was first identified in 1993 when the government was working on the Small Hydropower Master Plan. Cowel International (P) Ltd -- a company supported by German Development Agency (GIZ) had conducted the first feasibility study of the project.
Likewise, Pashupati Energy Development Company Limited has acquired generation licenses for Tungun Thosne Khola and Khani Khola hydropower projects. "Pashupati Energy has agreed to develop both the projects in two years," Pantha said. The developer has already started construction of the projects that are based in Bhattedanda, Lalitpur.
The developer will have to lay a 4-km transmission line to connect the project with the national grid at Malta substation.
Meanwhile, the government has scrapped the survey license of 675 MW Upper Panpu Khola that was awarded to Diwas Bahadur Basnet in 2007. "The survey license was cancelled after the project´s environmental impact assessment report was not approved because the project is located inside the Annapurna Conservation Area in Mustang district."