Tenants of industrial estates protest rent hike

Tenants of the country´s 11 industrial estates have launched series of protest programs against the government´s unilateral decision to increase rent of land and buildings inside the industrial estates.
The businessmen operating factories inside industrial estates went on warpath after Industrial Estate Management Limited (IEML) - the authority overseeing the management of industrial estates - increased the rent going against the agreement that it reached with Federation of Industries in Nepal Industrial Estates (FINIE) in January.
FINIE is the umbrella organization of more than 600 factories operating inside industrial estates.
IEML revised rent for spaces and buildings inside industrial estates effective from mid-April.
“We announced the protest after IEML went against the agreement,” Shailendra Lal Pradhan, president of FINIE, said. “We want IEML to stick to the agreement.”
Issuing a press release, FINIE has issued ultimatum to IEML to correct its decisions by Sunday. "We have asked the government to implement the understanding reached between FINIE and IEML in January," Pradhan said. "If the government didn´t address our demands, we will launch protest programs from May 6.”
According to the release, the FINIE has devised protest programs like submitting a memorandum to Minister for Industry and Secretary at the Ministry of Industry, urging all the political parties for their solidarity, and stop paying rent to IEML.
Meanwhile, Devendra Kumar Yadav, chairman of IEML, said the state-owned agency has not gone against the spirit of the agreement. “We have revised the rate as per the understanding reached with the tenants,” he added.
Private sector has made investment of more than Rs 13 billion in industrial estates. Factories in the industrial estates employ around 25,000 people, according to the release.

Govt to sign $70m loan deal with EIB next week

The government and the European Investment Bank (EIB) are set to sign a loan agreement worth of US$ 70 million that would be used for the development of 140 MW Tanahun Hydroelectric Project.
"The loan agreement will be signed in the first week of the coming month of May," Madhu Kumar Marasini, joint secretary at the Ministry of Finance (MoF), told Republica on Sunday.
The government and the EIB have already completed the loan negotiations that paved the way for signing of the agreement. "We completed negotiations a couple of months ago with EIB for a loan of US$ 70 million," Marasini said.
The EIB, which will be the third donor agency to sign loan agreement for the development of Tanahun Hydroelectric Project after Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA), is offering floating rate loan. Such debt typically uses an index or other base rate for establishing the interest rate for each relevant period.
According to Mahesh Prasad Acharya, project chief of the Tanahun Hydroelectric project, the interest rate will be between 2.5 and 3 percent. "But that will depend solely on how the market will function when we actually borrow the money from the EIB," Acharya said.
The government has already finalized the terms and conditions with the ADB and JICA for loan worth US$ 170 million and US$ 184 million, respectively. The government is taking loan from the EIB for the first time. Similarly, the government is also seeking a loan of around US$ 30 million from the Abu Dhabi Fund for Development (ADFD).
JICA has agreed to provide soft loan at 0.01 percent interest rate with 40 years of maturity period. "The recent developments indicate that we would be able to kick off construction of the project in the near future," Acharya expressed optimism.
The national pride project based in Bayas Municipality in Tanahun district will start power generation from 2020 if the construction starts as planned in 2014. According to officials engaged in the negotiation process, the ADB and JICA both also have taken Tanahun Hydropower Project as a ´prestige project´.

IBN doubts private sector's capacity to execute mega projects

The Investment Board of Nepal (IBN) is not confident about the domestic private sector executing mega projects under the public-private partnership (PPP) model.
"The Nepali private sector can form small ventures under PPP model, but it´s yet to grow and learn much in order to handle mega projects," Radesh Pant, chief executive officer of the IBN, said.
Interacting with media persons here on Friday, Pant said domestic private sector has to change its ´mindset´. However, Pant didn´t elaborate what exactly he meant by ´change in mindset´.
The IBN, which was formed more than one and half years ago to facilitate the implementation of large scale projects in the country, has a mandate to execute all its projects on the PPP model. The PPP model is an arrangement between the government and the private sector to execute different projects in the country.
"The private sector and its suitability is important to take forward the PPP model in order to execute any project," Sanjay Poudyal, senior advisor at Centre for Inclusive Growth, said, presenting a paper on PPP model during the event. "The private sector should have capacity as well as expertise to deliver services in a competitive price to make the PPP model successful while executing projects."
The IBN is currently handling 14 mega projects, including five large scale hydropower projects such as 650 MW Tamakoshi III, 900 MW Upper Karnali, 600 MW Upper Marsyangdi, 900 MW Arun III and 950 MW West Seti. The other infrastructure projects include Kathmandu-Tarai Fast Track, Kathmandu Metro Railway, and project to upgrade Tribhuvan International Airport, among others.
Meanwhile, private sector representatives have expressed dissatisfaction over the statement of IBN officials. "That´s not true," Pashupati Murarka, one of the vice presidents of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said, commenting on the statement of the IBN officials.
"The domestic private sector is competent enough to execute mega projects under PPP model," Murarka told Republica over phone. “I can´t believe that such a statement can from IBN.”
Similarly, Bhawani Rana, another vice president of the FNCCI, said the IBN should work toward creating a favorable environment for investment rather than making such statement. “Private sector is always ready to work in the PPP model if the government ensures investment friendly climate in the country," Rana added.

Insecurity causes erosion in business confidence

Last Tuesday, the name of Pashupati Murarka, a vice president at the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), was added to the list of victims of attacks by unidentified groups.
As had been the case in the previous attacks on people of the Nepali business community, no bodily assault was conducted on the target himself – this time Murarka, who again was left without any physical injury. The full force of the attack was directed only at the vehicle the intended target was occupying.
The shattered glasses of Murarka and the other businessmen’s rides have been replaced by now. But it will take longer to restore the confidence of businesspeople and investors shaken by the attack.
The damage has been done!
“Business confidence plays a vital role in luring new investment. It is even more important than the availability of energy and political stability,” Murarka said. “The government must create a favorable environment so that investors do not have to worry about their security.”
Considering the events of past few months, Murarka’s wishes might not come true any time soon since the government has not been able to nab the people who launched the attacks on businessmen.
“This is continuing to erode confidence of businessmen and investors,” Murarka said.
The government announced Investment Year 2012/13 to lure foreign direct investment (FDI). Following this, the government has received investment commitment from abroad. But the response has not been that overwhelming. One of the major reasons for this is the government’s inability to ensure security of investors.
“Let alone reviewing and amending the necessary laws to attract foreign as well as domestic investment, it has failed even to provide security to the business community,” Murarka said.
Government officials also echo the private sector’s sentiment.
“It is unfortunate that the business community has lost investment confidence due to different reasons such as union unrest and trade unions’ concentration on garnering political clout through an unholy nexus,” Kewal Bhandari, joint secretary at the Ministry of Labor and Employment, and a former director general of the Department of Labor, said.
Some of the issues would have been solved had the political parties shown some seriousness. “But almost no one is serious about the country’s economy,” Bhandari said. “So how can we expect the business community to make new investments?”
The flow of investment depends to some degree on the business confidence level. The higher the business confidence, more the flow of investment will be. When investors are living in fear, nobody wants to start a new project.
But it is not only industrialists like Murarka who have lost confidence. Even small and medium-scale entrepreneurs feel the same.
“Small-scale industrialists have been intimidated by the recent attacks,” Lata Pyakurel, former president of the Federation of Nepalese Cottage and Small Industry (FNCSI), said. “Attack on big investors creates terror among small-scale investors and entrepreneurs.”
Who will come to the rescue of small-scale investors when the ‘big ones’ are under fire, she asked.
“The psychological threat has disturbed promoters of small and medium enterprises,” Murarka said.
FNCCI officials are worried that small and medium enterprises may start shifting their bases to other countries to escape the adversities they face here. “The level of confidence plays an integral role in the decision-making process,” Murarka said.
Business confidence in Nepal was low during the decade-long armed insurgency. “But that was understandable,” FNCCI Vice President Bhawani Rana said. “It’s very unfortunate that investor confidence has not been restored even after the commencement of the peace process.”
Further explaining the importance of investor confidence, Rana said that the falling investment confidence is going to affect the country’s economic growth. “These kinds of attacks create terror in the business community, which paralyzes everything, including the economy,” Rana said.
Many businesspeople now say they are not much bothered about issues like availability of power, documentation process and labor issues. “Forget about being aggressive in crossing hurdles in starting a business, we are not even sure about our security,” Rana said. “Fear itself is a big hurdle to start a business.”
Lately, foreign investors are shying away from even thinking of making an investment in Nepal, Murarka said. “We can’t calculate the loss the country has been bearing due to such decisions, as potential foreign investors are dropping their plans to travel to Nepal.”

Govt fails to fast-track Upper Marsyangdi license

The government has not been able to fast track the generating license for the 600-megawatt Upper Marsyangdi hydropower project although Himtal Hydropower Co, Ltd., a subsidiary of Indian infrastructure developer GMR, applied for the license before its survey license expired a couple of months ago.
Himtal had applied for the generation license through the Investment Board of Nepal (IBN), the high-level government body assigned to facilitate development of large scale projects, when the survey license was still valid.
"We have not received approval from the government for the generation license," D K Singh, general manager of Himtal, said. However, he declined to say anything further, citing a privacy protocol he has signed with IBN. "You better contact officials at the GMR office in India or IBN itself," he said.
IBN has rather asked Himtal to sign a project negotiation agreement (PNA), which guarantees the developer´s commitment to completing the project development agreement (PDA) within one-and-half years of the signing of the PNA. "Himtal (GMR) has not signed the PDA so far," a source privy to developments told Republica.
Himtal General Manager Singh refrained from commenting on the PNA signing. "Perhaps the PNA is currently under discussion at the board of directors of GMR," the source further said. However, Republica´s efforts to elicit any comment from IBN were futile as Radesh Pant, chief executive officer at IBN, did not respond to repeated attempts to contact him.
Meanwhile, officials from the Department of Electricity Development (DoED), which issues licenses to power developers, said that GMR itself doesn´t want a generation license without first finalizing the PDA negotiations. "The developer wants to finalize the PDA deal before seeking a generation license," Gokarana Raj Pantha, senior divisional engineer at DoED, said. "GMR is looking to finalizing the PDA deal since that will help them generate financing for the project."
IBN, which is developing the PDA template -- a standard basis for PDA negotiations for hydropower projects above 500 MW capacity, already approved additional investment from Rs 450 million to Rs 1.9 billion in December 2012.
Additionally, the government has granted permission to start land acquisition verification (LAV) at the project site in Lamjung and Manang districts. It has also approved the environment impact assessment (EIA) report prepared by the developer.
The government has awarded the project to Himtal under the build-own-operate-transfer (BOOT) format.

Prosperity depends on political course

Policies are formulated based on reality. Policies are made for better future. Forecast of the future is mostly influenced by hope. But hope itself should not be a determining factor to make policy decisions. It neither fast tracks our desire to develop a prosperous country, nor is a foundation of growth. Still, the hope guides us!
The country’s economic growth is shrinking.
An economic growth rate of just 3.5 percent has been forecast for the current fiscal year 2012/13, the lowest in the last five years. Lack of infrastructure, acute power shortage and low investment are some of the major bottlenecks in our efforts to achieve the desired level of economic growth.
Infrastructure, hydropower, and private sector development are the major areas where the government should focus on in the coming days in a bid to accelerate the economic growth. More specifically, only a vibrant private sector can help the country fill the infrastructure gaps and address the power shortage by injecting new investment in energy generation.
The dynamics of the country’s economic growth is slowly changing. The economy that was mainly driven by the agricultural sector, and remittance to some extent, is shifting to the services. The services sector has enjoyed a relatively higher growth rate in the last couple of years. Keeping this in mind, the focus should be on further accelerating the growth of services sector. For that, we need adequate infrastructure, power and an effective private sector.

The private sector was not able to make much progress despite the government’s free market-oriented policies since 1990 due to the extortion drive by the Maoists during the decade-long insurgency. The end of the insurgency in 2006 brought relief to the private sector and the Constituent Assembly (CA) election in 2008 gave some hope.
With the signing of the Comprehensive Peace Agreement (CPA) between the then seven parties and CPN (Maoist) in 2006, people were hopeful of economic development in the country. But that didn’t last long as the CA was dissolved in May 2012 without promulgating a new constitution.
People continued to suffer as the political mistrust started deepening even after the CA election. As a result, the private sector of the country was reluctant to make new investments and the mega projects in infrastructure development couldn’t gain momentum as successive governments failed to bring full-fledged budget on time.
Mega projects such as the Kathmandu-Tarai Fast Track, which will connect Kathmandu and Nijgadh by a 76-kilometer highway, are yet to find a developer. The much-touted Kathmandu-Hetauda Tunnel Highway is limited to talks. Neither the private sector nor the government is working seriously to devise plans to generate funds for the development of the projects.
The private sector is not ready to make the level of investment required to achieve the desired level of growth rate due to different reasons such as political instability and policy inconsistency resulting from frequently changing governments.
The economic growth rate had reached 5.8 percent in fiscal year 2007/08 mainly because the people were hopeful after the CPA was signed and the then CPN (Maoist) joined peaceful politics laying down its arms. However, that hope was short-lived.
The private sector that was badly hit by the decade-long armed insurgency in the country again started to be intimidated by the political parties. “We have to start from the political parties if we want to a corruption-free society,” Suraj Vaidya, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said.
Following the CA election in 2008, some efforts were made in terms of infrastructure development. The government’s efforts to reconstruct the physical infrastructures that were damaged during the insurgency gained momentum after it established a separate entity, the Ministry of Peace and Reconstruction, following the CA election.
The private sector’s growth that is crucial to achieving the desired level of economic growth has not happened due to low investment and lack of favorable environment that can lure domestic as well as foreign investment in the country. “We need investments but at the same time the environment is not favorable for injecting fresh investment,” Vaidya said.
The economic slowdown and declining level of confidence of the business community doesn’t give much reason to be hopeful. But that does not mean we would not see any progress in course of time. “The situation is not favorable for making additional investment in the country,” said Pashupati Murarka, vice-president of FNCCI, who has investment in the cement industry in the country.
However, some others are still optimistic about the prospects in the next five years. “I am quite hopeful about the future and I see it happening,” Srijana Bhattarai, a returnee from the USA, who works for the Investment Board of Nepal (IBN), a high level government entity, said. “Probably, you won’t hear the same thing from people from the earlier generation.”
The development of the country’s private sector largely depends on how the political course unfolds ahead. Meanwhile, what we should not forget is that the private sector itself has a role to play in realizing our dream of achieving double-digit growth. The private sector that is supposed to lead the country’s economy has to make new investments in some strategic sector to achieve that goal.
Investment is required mainly in the infrastructure and energy sector from the government as well as private sector. “We need public as well as private investment to realize our dreams,” Murarka said.

SN Power signs PNA with IBN

The Investment Board of Nepal (IBN) has signed project negotiation agreement (PNA) with SN Power, a Norwegian power developer engaged in development of 650MW Tamakoshi hydropower project. SN Power is the first company to ink PNA, although the IBN has asked all hydro project developers to sign such agreement.
"GMR and Sutlej Jal Vidyut Nigam, two Indian infrastructure developers, have not signed PNA so far," a source privy to the issue told Republica. The IBN had previously asked all the three developers--GMR, Sutlej and SN Power--to sign the PNA.
PNA sets a standard timeframe to complete project development agreement (PDA) negotiation for hydropower projects above 500 MW. According to the PNA document, developers and the government should sign PDA within one and half years of beginning PDA negotiations.
The GMR is engaged in development of 900 MW Upper Karnali and 600 MW Marsyangdi hydropower projects. Sutlej is working on developing 900 MW Arun III hydropower project.
"Sutlej still has time to sign PNA. But GMR has failed to sign PNA for Marsyangdi hydro project within deadline," the source revealed. "GMR, however, has not declined to sign the document. It has said it is preparing to sign the agreement."
The IBN, a high-level government entity that was formed more than one and half years ago to facilitate development of large-scale infrastructure projects, last week formed a PDA negotiation team.
"The IBN has communicated with developers to start PDA negotiations by the end of May," the source said. "The IBN is hoping that GMR would sign PNA before that."
According to the PNA template, PDA negotiation with hydro project developers would be automatically terminated if PDA could not be completed within one and half years of commencement of PDA negotiations.
It is said PNA will end the proclivity to lingering PDA negotiations for mega hydropower projects.
According to the source, the IBN developed PNA template through technical assistance of the Centre for Inclusive Growth (CIG), an organization that focuses on policy dialogues in the country and is funded by the Department for International Development (DFID) of the British government.
A high-ranking IBN official said: "The concept of PNA was coined to pass the ownership of the project to developers."

JCF workers unlikely to get payoff package this year

The workers of Janakpur Cigarette Factory (JCF), who have been seeking golden handshake offer from the management, are unlikely to be paid off this fiscal year.
An official at the Ministry of Finance (MoF) said there was no such plan for JCF employees in the current fiscal year. “The government has not earmarked any fund for the purpose in the recently introduced full budget,” the official said. “However, a high-level team has already devised a plan to get rid of the employees.”
The team has representations from finance ministry, industry ministry and trade unions. All the 893 workers in the state-owned cigarette maker have sought voluntary retirement.
Krishna Gyawali, secretary at the Ministry of Industry (MoI), said the government might not be able to arrange fund for the purpose in this fiscal year.
According to officials, the government will have to allocate Rs 2.6 billion if it wants to meet all the demands of the workers. “But as per the existing rules, it will cost the government only around Rs 1.26 billion,” said Hari Sharan Pudasaini, under secretary at MoF who is also in the high-level team.
The team has valued JFC´s assets at around Rs 10 billion. “The total outstanding liability of the factory stands at around Rs 2.3 billion," said Pudasaini.
Employees at the factory want the affairs to end as soon as possible so that they can start something on their own. “We are tired of apprising the officials of our demand,” Arjun Chaulagai, one of the workers, said. “We would be able to start something on our own if we get compensation package at the earliest.”
JCF, which was established in 1965 with the support of the Russian government, ceased operations in 2010/11 after it failed to compete with private players.

UN forecasts 4% growth for Nepal

the government and other agencies have been paring down the forecast for Nepal´s economic growth to 3.56 percent, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has Thursday said growth would be maintained at 4 percent for the current fiscal year.
"A more realistic growth projection would be about 4 percent," reads a UNESCAP statement released here on Thursday. The UNESCAP, releasing its annual report on ´economic and social survey of Asia and Pacific 2013´, said political instability, frequent strikes and persistent labor problems, and severe power shortage are major reasons for low growth.
The report also touched the inflation of the country. "Inflation in Nepal is closely linked to inflation in India because of the fixed exchange rates between the currencies of the two countries," it said.
UNESCAP has highlighted labor shortage in the domestic market of Nepal and recommended some policy measures to take in order to accelerate economic growth. "In order to realize its development potential, Nepal will have to overcome a number of development challenges such as infrastructure gaps and energy insecurity," reads the report.
Similarly, UNESCAP has suggested the government address some deepening problems like poverty, hunger, and rising inequality, among others. "The services sector of the country is having a faster growth compared to other sectors of the economy," the report outlines. "South Asian countries face growing energy demand, and a number of energy challenges."
Meanwhile, there are some suggestions in the macro economic policy front of Asia Pacific countries. "A job guarantee program, a universal and non-contributory pension for all aged 65 or older, increasing public expenditure in health sector and addressing energy problems required to be managed through macro economic policy adjustments in the economy," highlights the report.

Survey license applications of NEA scrapped

The Department of Electricity Development (DoED) has scrapped applications for survey licenses of two storage type projects - Kali Gandaki II (660 MW) and Andhi Khola (180 MW).
The department cancelled applications of Nepal Electricity Authority (NEA) after the latter failed to deposit the license fee within the stipulated timeframe.
“The applications were scrapped after NEA failed to pay the fee even after 35-day public notice was published,” Gokarna Raj Pantha, senior divisional engineer at DoED, told Republica.
In a bid to end the practice of holding licenses of water resources, the government had revised survey license fee for all hydropower projects in October last year.
“Now onwards, DoED won´t take any decision on Kali Gandaki II as all hydropower projects above 500 MW are being handled by the Nepal Investment Board (NIB),” added Pantha.
The NIB is a high-level government entity established around one and half years ago to implement mega projects on a fast track mode.
The department has also warned all the applicants to pay the required fee as per the revised rates.
Meanwhile, the board of directors of NIB has formed a project development agreement (PDA) negotiation team to hold dialogues with power developers. According to a press statement issued on Tuesday, Anup Kumar Upadhaya, director general at DoED; Keshab Dhoj Adhikari, joint secretary at Ministry of Energy; Bainkuntha Aryal, joint secretary at the Ministry of Finance; Mukunda Paudyal, joint secretary at NIB, Radesh Pant, CEO of NIB; and a representative from the Ministry of Law and Justice are the members of the team.
The team will start PDA negotiation with the developers of four mega projects -- Arun III (900 MW), Tamakoshi III (650 MW), Upper Karnali (900 MW) and Upper Marshyangdi (600 MW).
Sutlej Jal Vidyut Nigam of India is developing the Arun III, while another Indian company GMR is executing the Upper Karnali and Upper Marsyangdi projects. Similarly, Norwegian firm SN Power is developing the Tamakoshi III.

Per capita income of Nepalis doubled in 32 yrs: Report

The Human Development Report 2013 of United Nation Development Program (UNDP) has revealed that the gross national income (GNI) per capita of Nepalis went up by 101 percent between 1980 and 2012 to US$ 1,137 along with improvement in other indicators.
Despite the sharp increase in the GNI per capita, it is still far below the average GNI per capita of South Asian nations which stand at $3,343.
GNI per capita is the dollar value of a country´s final income in a year, divided by its population. The indicator reflects the average income of the country´s citizens in the given year.
The report launched on Tuesday reveals that most of the indicators such as life expectancy at birth, expected years of schooling, mean years of schooling, per capita income, and overall value of human development index have improved during the period.
According to the report, life expectancy of Nepalis at birth has increased by 20.9 years to 69.1 years between 1980 and 2012. Similarly, mean years of schooling has increased to 3.2 years from 2.6 years during the period.
The report that analyzes the human development in 40 developing countries further shows expected years of schooling has increased by 4.4 years to 8.9 years between 1980 and 2012.
According to the report, Nepal´s human development index (HDI) value 0.463 in 2012 is almost double compared to the value in 1980. However, the value is still below the average of 0.466 for countries in the low human development group and below the average of 0.558 for South Asian countries.
The HDI is an average measure of basic human development achievements in a country. In the report, Nepal has been ranked at 157th position out of 187 countries.
Highlighting the main findings of the report, Dr Basudeb Guha-Khasnobis, economic advisor at UNDP, said Nepal should not delay on formulating policies and take further action for human development. "Inaction or procrastination will set the country back immensely," he said.

PTCN bags Dhalkebar-Muzaffarpur transmission line construction license

The government has decided to transfer the license for development and management of the Dhalkebar-Muzaffarpur 400 kV cross-border transmission line to Power Transmission Company of Nepal (PTCN) from Nepal Electricity Authority (NEA).
"The Ministry of Finance (MoF) has given its nod for the hand over of the license," a high-level official at the Ministry of Energy (MoE) told Republica.
Earlier, NEA had bagged the license from the government to develop the transmission line. The PTCN is a subsidiary of NEA that was set up mainly to develop the 400 kV cross border transmission line.
The transmission line, which is supposed to be developed with loan assistance from the Exim Bank of India, is expected to facilitate power trade between the two countries. The transmission line will be 140 kilometers long and 40 kilometers section, from Dhalkebar to Bhittamod, will lie in Nepal.
Nepal and India had signed a memorandum of understanding in 2009 to develop the project in fast track mode. NEA had signed the MoU with three Indian stakeholders -- Power Trading Corporation (PTC), Infrastructure Leasing & Financial Services (IL&FS) and Power Grid Corporation of India Ltd (PGCIL).
As per the agreement, Nepal and India are to lay the transmission line in their respective countries with loan assistance from the Exim Bank of India. But the Exim Bank has yet to release the loan pledged to Nepal.
Similarly, the two countries also plan to lay other two cross-border transmission lines -- 112 km 400 kV Duhabi-Purnia and 125 km 400 kV Butwal-Gorakhpur.
According to NEA officials approximately 22 km section of the Duhabi-Purnia transmission line lies in Nepali territory and around 90 km section lies in India. Similarly, approximately, 25 km section of the Butwal-Gorakhpur transmission line falls under Nepali territory and the remaining 100 km section in India.
However, the Ministry of Energy -- the body entity to look after the energy sector of the country, has yet to approve the hand over of license from the NEA to PTCN. "MoE is also prepared to give its nod to the handover of the license of Dhalkebar-Muzaffarpur transmission line to PTCN," the official at the MoE said. "However, a formal decision has yet to be made."

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.

Udayapur Cement seeks Rs 200m to buy raw materials, generator

Udayapur Cement Factory has asked the government to provide it a fund of Rs 200 million to buy raw materials and generators, and to upgrade obsolete machineries.
The state-owned cement manufacturer, which had been seeking financial assistance from the government since last year, submitted a proposal to this effect to the Ministry of Industry (MoI) last week.
"We need funds to procure raw materials and buy a generator,” Surendra Chaurasiya, general manager of Udayapur Cement Factory, told Republica over phone.
The government had not released any amount of money to the factory last year due to its failure to release full-fledged budget on time.
“I am hopeful that the government will arrange funds this time,” said Chaurasiya.
The factory with installed capacity of 500 tons is also suffering from overstaffing and obsolete machineries. The factory has 525 staff on its payroll.
“We need to upgrade the machines if we are to ensure smooth supplies in the market,” he added.
The MoI, which looks after state-owned enterprises, has decided to forward the factory´s proposal to the Ministry of Finance (MoF).
“At the moment, we are studying the proposal submitted by the cement factory,” an official at MoI said.
Earlier, officials of MoI had said that they were working on to address problems faced by the cement manufacturer.
Lack of raw materials is the biggest problems faced by the factory. As the factory sources key materials, including coal, from India, the government´s procurement policy creates hassles to it time and again. “Because of the policy we cannot take prompt decision as per the market mechanism to procure required amount of raw materials," he added.
The factory, which was established around 18 years ago with Japanese assistance, is also losing its production capacity due to obsolete machineries. "Some of our machineries are 18 years old. We need to replace them as soon as possible,” Chaurasiya said, adding, “But we need a huge amount of money for that.”
The factory has cumulative loss of Rs 17.73 billion. The MoI had even requested MoF to arrange Rs 1 billion last year from the Russian government. However, the MoF didn´t forward the request to the Russian government.
The study of public enterprises conducted by the government in fiscal year 2011/12 had suggested upgrading machineries of the state-owned cement manufacturer.

Economists slam budget, pvt sector welcomes it

The full budget that Finance Minister Shankar Prasad Koirala on Tuesday has received mixed reactions. While the private sector representatives have welcomed the budget, economists have slammed it, terming the budget a mere ritual activity.
Republica requested some private sector representatives and economists for their comments on the budget over phone. Excerpts:
Prof Dr Bishwambher Pyakuryal
Economist
This budget will increase inflation rather than bringing down its mounting pressure on economy. Trade deficit is constantly increasing but the government has not devised any specific plans to address the problem. I don´t think this budget will increase capital expenditure as it has only made allocations to government agencies to fund their activities. There is not much flexibility for any policy level changes owing to short period of time.
Still, the budget could have been better in terms of addressing problems that are affecting the overall functioning of the economy.
Narendra Basnet
President
Confederation of Nepalese Industries
The government has introduced some policies despite the difficult situation which is appreciative. I welcome the government´s move to bring budget at this time. In the budget, the government has said that it would encourage private sector, which is meaningful for us. The finance minister has stressed the need to attract investment from the private sector in areas like hydropower and tourism. This should be appreciated.
The budget has several programs, but we will have to wait and see how they will be executed in the next three months. I am hopeful that the country´s economy will take a right path with this budget
Pashupati Murarka
Vice president
FNCCI
This budget will help resolve the liquidity strains in the banking system. The government has allocated relatively bigger amount of money for recurrent expenditure. Also there will be capital expenditure. I am hopeful that this will give a new lease of life to the construction sector. Contractors will get payment which will definitely lead to more economic activities.
I don´t think this budget will be a pill for all ills in the economic sector. But it definitely has given some respite to the private sector. The government has introduced many programs; I am hopeful that they would be implemented accordingly.
Dr Posh Raj Pandey
Economist
The budget is just a ritual activity of the government. It will not give any direction to the economy. The government has just given some additional budget to the on-going projects and some other less significant projects. I don´t think this will make any difference to our present situation.
The government, however, has tried to address some short-term problems that were affecting regular functioning of development works and state mechanisms. The government has made allocations for the proposed election. I think the performance of this government should be measured based on how it moves ahead to hold election.
Suresh Basnet
President
Nepal Chamber of Commerce
This budget is just a continuation of old programs. However, it has energized the private sector as it addresses the private sector and its woes. I am hopeful that the budget will be successful in lead the nation´s economy to the right track. The budget has touched several areas such as trade and investment which is important for us.
Moreover, this budget has increased the level of confidence among private sector. I am hopeful that the introduction of full budget will spur economic activities in the country.

FNCCI to seek political commitment for hydropower development

The Federation of Nepalese Chambers of Commerce and Industries (FNCCI) has sought political commitment on eight specific areas for hydropower development in the country.
The apex body of Nepali private sector has sought commitment of the political parties on political stability, regulatory and institutional framework, infrastructure development, private investment and financing, export of electricity, social and environmental concerns, and political mobilization, education and awareness.
Leaders of different political parties will express their commitments to the aforesaid issues by signing a document entitled ´Political Commitment on the Development of Hydropower´ on the sidelines of the 47th annual general meeting of FNCCI on Wednesday.
The document developed by FNCCI includes points such as common principles and policies for hydropower development.
FNCCI decided to seek commitment of political parties to make sure that mega hydro projects move ahead without hindrance.
"The primary objective of this commitment letter is to set out the common principles that various political parties adhere to for the development of hydropower in Nepal," reads the draft of the document.
FNCCI has already decided to make hydropower the main agenda in its 47th AGM.
"Both domestic and foreign investors are skeptic about political situation and governance system in the country,” reads the document. “Political parties should recognize and declare hydropower a national priority sector and ensure that their activities do not hamper development and operation of hydropower projects and put investors at risk.”
FNCCI has also put emphasis on regulatory and institutional issues in the hydropower sector. "Political parties should be committed to support and facilitate plans, policies, laws, regulations and actions that are aimed to achieve planned and sustainable development of hydropower," the document states.
The document categorically pinpoints inefficiency of Nepal Electricity Authority (NEA) as one of the reasons behind slow pace of hydropower development in the country. “There is also a need to restructure NEA as a whole to develop a competitive market in the country," the document reads.
Similarly, FNCCI is also seeking commitment of political parties on private investment and financing in the hydropower sector. It is also asking political parties to commit to the investors that hydropower development works would not be affected even after the country adopts federal setup.

Govt to scrap 600 survey license applications

The government is preparing to scrap around 600 applications for survey licenses of hydropower projects as the applicants didn´t turn up to deposit the license fees even after the expiry of the government´s 35-day notice.
“We have started the process to scrap the applications as the applicants didn´t turn up to pay the license fees,” said Gokarna Raj Pantha, senior divisional engineer at the Department of Electricity Development (DoED).
The DoED had issued a notice around one-and-a-half month ago asking all the applicants to pay fees on time. “Only around five applicants paid the license fees on time,” said Pantha. “Similarly, around five applicants have moved the court after the government issued the notice.”
According to Pantha, the applications for survey license had been received for all kinds of hydropower projects -- small, medium and large scale. “We had received applications for survey licenses of big projects such as the 660 megawatts Kali Gandaki to small hydropower projects with less than 1 megawatt capacity,” said Pantha.
DoED had issued the notice after the government increased application fees for all kinds of hydropower projects in October 2012. The government had increased the survey license fees aiming to check the practice among developers of holding survey licenses without working on the projects.
Survey licenses for hydropower projects have been divided into six different categories. The new rates for survey licenses are: Rs 1 million for hydropower projects with 1 to 5 megawatts capacity, Rs 2 million for projects with 5 to 10 megawatts capacity, Rs 3 million for 10 to 25 megawatts projects, Rs 4 million for 25 to 100 megawatts projects, Rs 5 million for 100 to 500 megawatts projects and Rs 6 million for projects above 500 megawatts.
However, Pantha clarified that the 600 applications may not belong to different projects. “There may be several applications for the same project,” he said.
“There was a negative tendency among applicants of holding licenses as the fee was very nominal,” Pantha added. “The government has now taken a strong measure to discourage license holders with ulterior motives,” Pantha said.

NIB forms PDA talks team for big hydro projects

The secretariat of the Nepal Investment Board (NIB), a high-level government entity, has formed a project development agreement (PDA) negotiation team and is planning to seek approval for it from the NIB board of directors.
The NIB secretariat has formed a six-member team comprising representatives from NIB and the Ministries of Finance (MoF), Energy (MoE) and Forests and Soil Conversation (MoFSC), according to a member of the team.
"The team should be approved by the board. The NIB secretariat will forward a proposal to the board for that purpose," the member said on condition of anonymity.
According to the source, NIB has selected Radesh Pant, chief executive officer at NIB; Mukunda Poudel, joint-secretary at NIB, and Baikuntha Aryal, joint-secretary at MoF, as well as another joint-secretary at MoF, two joint-secretaries at MoE and a joint-secretary at MoFSC as members of the PDA negotiation team.
NIB, which is currently working to take forward the development of four mega hydropower projects, formed the team on the basis of a mandate it received from the government a couple of months ago.
The projects currently on hand include the 900 MW Arun III, 650 MW Tamakoshi III, 900 MW Upper Karnali and 600 MW Upper Marsyangdi.
"The team will start PDA negotiations with the developers of those four mega projects after it is approved by the board of directors meeting scheduled within the next couple of weeks. Sutlej Jal Vidyut Nigam is lined up for the development of Arun III, GMR for Upper Karnali and Upper Marsyangdi and SN Power for Tamakoshi III. Sutlej and GMR and Indian companies whereas SN Power is Norwegian.
The PDA negotiations, one of the crucial stages in project development, are yet to be held with all the developers. According to officials, the PDA template -- a baseline document for such negotiations -- is also yet to be finalized.
However, Pant said that the board of directors has already approved the PDA template.
NIB is developing the PDA template with the technical and legal support of Herbert Smith, a legal consultancy firm based in London.
"The PDA template is a basic requirement in sitting for negotiations with developers," an official at the Office of Prime Minister and Council of Ministers told Republica. "The finalization of the PDA template is even more important at this moment."

Govt unlikely to meet pay demands of Janakpur Cigarette workers

The government may not fulfill all the demands of employees of Janakpur Cigarette Factory on golden handshake, a team that recently conducted a study on the state-owned enterprise´s status has indicated.
"The government is positive about demands placed by workers but it may not be able to fulfill all of them," an official at the Ministry of Finance (MoF) told Republica. "The government will sit again with workers--who are anticipating early launch of the voluntary retirement scheme--to settle the issue.”
According to the official, it will cost the government around Rs 2.6 billion to provide severance package to employees who want to voluntarily retire from their jobs. This amount is higher than Rs 1.26 billion derived by the government based on existing rules.
The MoF had earlier formed a team to assess economic viability, liabilities and assets of the company after workers started putting pressure on the government to relieve them from work at the factory which has remained closed for two years.
The team that comprised representatives of trade unions at the company had valued the company´s assets at around Rs 10 billion. "The total outstanding liability of the company stands at around Rs 2.3 billion," said Hari Sharan Pudasaini, an MoF under secretary, who is also the coordinator of the team.
Employees at the factory had voluntarily asked the government to relieve them from work last December and pay them as soon as possible. The workers had first placed the request at the Ministry of Industry (MoI), which later forwarded it to the MoF.
According to Arjun Chaulagai, one of the workers at the company, Finance Minister Shankar Prasad Koirala has also expressed verbal commitment to settle the issue as soon as . "I will immediately take a look at the report prepared by the committee and try to settle it," Chaulagai quoted the finance minister as saying.
The company that was established in 1965 with the support of the Russian government used to make famous brands of cigarettes like Yak, Gaida and Deurali.
However, with the entry of Surya Tobacco, its near monopoly in the tobacco market ended and it started incurring losses. By the end of 2010/11, the company had accumulated cumulative loss of Rs 170.80 million.
The company has cited use of obsolete machines for its collapse. But in addition to that unnecessary political intervention in operation of the factory, interference in appointment of the factory´s chief and overstaffing have also led to the failure of the company.

With no template, Upper Trishuli-I PDA talks stall

The government has not been able to sit for project development agreement (PDA) negotiations -- a crucial part of a project development process -- with the developer of 216 megawatt Upper Trishuli-I, as it lacks a proper PDA template, the baseline for such negotiations.
The Ministry of Energy (MoE), the entity that is supposed to hold PDA negotiations with hydropower project developers (below 500 MW capacity) has said it could not sit for PDA talks with the developer of Upper Trishuli-I as it didn´t receive the PDA template from Nepal Investment Board (NIB) on time.
"We have not received a proper PDA template from NIB so far," an official at MoE said, preferring anonymity, as he was not authorized to talk to media. "We have received one template from NIB but it is exactly the same thing that we had forwarded to them after NIB came into existence one and half years ago."
Nepal Water and Energy Development Company Private Limited (NWEDC), the developer of the project, has already paid US$ 324,000 as processing fee for PDA negotiations. "We are waiting for PDA negotiations to happen in the near future," a top official from the company told Republica on Thursday.
"We will sit for PDA talks with NWEDC as soon as we receive a complete PDA template from NIB," the official from the ministry said, adding that MoE should use a PDA template developed by NIB as the government has decided to apply a uniform template for all hydropower projects.
NIB had said it was developing the PDA template with technical and legal support from Herbert Smith, a legal advisory firm based in London.
However, Radesh Pant, chief executive officer of NIB, has denied what MoE officials said. "We sent them the PDA template approved by the NIB board of directors," Pant said in reply to a question from Republica on Thursday evening.
The company, which is 50 percent owned by Korea South-East Power Company (KOSEP), has been seeking early PDA talks as it targets to initiate construction of the project within 2013.
According to company officials, the company has already completed the detailed project report and received approval from the government for its environmental impact assessment report.
Apart from KOSEP, 15 percent shares of the company are currently owned by Daelim, 10 percent by Kyeryong Construction and the remaining 25 percent by Bikesh Pradhanang.
Meanwhile, a source close to the company disclosed that the International Finance Company, one of the World Bank group, has bought 15 percent of the shares from Pradhanang. "But 15 shares from Pradhanang have not been transferred to IFC so far," the source added.

Hydropower development top agenda at FNCCI AGM

Hydropower development will be the main agenda in the 47th annual general meeting (AGM) to be held on Wednesday.
“Our priority at this moment is ´hydropower development´. We are taking it forward through our upcoming AGM,” Suraj Vaidya, president of FNCCI, said. "During the AGM, we will seek commitment from the political parties on hydropower development.”
He also informed that FNCCI has developed a hydropower development strategy document which will be unveiled during the AGM. Vaidya, however, didn´t divulge details of the document.
"We have invited most of the political parties to our AGM. This is the first time we are seeking political commitment on a particular issue," Vaidya added. We can´t be specific and ask political leaders to take forward a particular project. But we want some large scale hydropower projects to be developed in the country at any cost."
Bhawani Rana, vice president of FNCCI, said Pushpa Kamal Dahal, chairman of UCPN (Maoist); Sushil Koirala, president of Nepali Congress; Jhalanath Khanal, president of CPN (UML); Bijaya Gachchhadar, president of Madhesi People´s Rights Forum - Democratic; Surya Bahadur Thapa, president of Rastriya Janashakti Party; and Mahantha Thakur, president of Terai Madhes Democratic Party, among other leaders will sign the document.
Vaidya said experts from power developers having interest in Nepal are also attending the AGM.
Dr Lu Guojun, assistant president of China Three Gorges Corporation; Jean Michael, chief hydro expert from the World Bank; Richard Taylor, executive director of International Hydropower Association; and Chanththaboun Souk-Aloune, deputy director of Department of Energy Business of Laos are attending the event, according to Vaidya.
The AGM will also see participation of Harvinder Manocha, vice president of GMR Enegry; Yongping Zhai, director of South Asia Energy Division of Asian Development Bank; and Raghuveer Y Sharma, chief investment officer of International Finance Corporation (IFC).

Hydel seeks conditional generation license

Ambeshwar Engineering Hydropower Private Limited (AEHPL) has sought conditional license to begin construction works for 180 megawatts Kaligandaki Koban hydropower project, though the company has yet to get an environment impact assessment approval from the government.
"The company has written a letter to the Ministry of Energy (MoE) seeking conditional generation license for the project," an official at the ministry said preferring anonymity.
The AEHPL, a joint venture of ESSAR Power Limited, an Indian company registered in Nepal, has requested government to issue conditional generation license so that it could begin construction in near future. "However, the company has not said when it will start the construction of the project," the official said.
The government has not made any decision so far on issuing license to the project. "It is yet to be discussed among the concerned divisions and departments," the official said. Normally, the government does not issue generation license to projects that have not received EIA approval.
However, the government has provided generation license to 400 MW Lower Arun Hydropower Project. The project based in Mustang, a mountainous district in the north, has not yet signed a power purchase agreement (PPA) with the Nepal Electricity Authority (NEA), the sole state-owned hydropower sector regulatory entity. The project that is estimated to cost around Rs 40 billion has been successful to attract attention of private as well as development agencies eager to invest.
The company has completed the detailed project report (DPR). "The company has asked for a conditional generation license but has not demonstrated its financial closure so far," the official informed.
Meanwhile, independent power producers have urged the government to waive off value added tax on civil construction of hydropower projects. They also have half a dozen other demands.
A delegation of the Independent Power Producers´ Association Nepal (IPPAN) had met Shankar Prasad Koirala, the minister for finance and industry, on Wednesday and made an appeal for host of changes to the existing policies.
According to the memorandum the IPPAN officials submitted to Koirala, power producers have asked government to rethink about the Nepal Rastra Bank´s refinancing policy, implement the PPA rate that the government has endorsed for hydropower projects that will be completed by April 2015 and develop an efficient mechanism for coordination among the concerned agencies for project development.
"The refinancing policy of the NRB should be changed," reads the memorandum. "It should be for the entire period of project development or it should be automatically renewed each year during the project development period." As of now, the NRB refinances only for six months.