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.