Storage-type hydropower to cost up to Rs 10.6 per KPH

A high-level pannel has recommended purchase prices of Rs 10.60 and Rs 7.88 per kilowatt hour (KPH) for electricity generated from storage-type hydropower projects during dry and wet seasons respectively.
A taskforce formed at the Ministry of Energy (MoE) has recommended the new rates for Power Purchase Agreements (PPA).
"These PPA rates are recommened on the basis of the minimum price at which Nepal Electricity Authority (NEA) can import power from India under the short-term power market by 2018," reads a report submitted to MoE last week.
An official at MoE,who is also a member of the panel, said the new rates were at par with those set for renewable energy sources such as solar and bio-mass.
"No one should be confused about the fact that the newly recommended rates are applicable only for storage-type hydropower projects. They are not meant for run-of-the-river (ROR) type projects," added the official.
Under the new rate structure, separate PPA rates are set for the wet season -- wet season peak hours and wet season off-peak hours. According to the report, the PPA rate for wet season off-peak hours can fall between Rs 2 to Rs 5.73 KPH. "The exact rate for wet season off-peak hours is subject to negotiation," reads the report obtained by Republica.
The report states that the dry season refers to a period between December to the end of May while a peak-hour period is any six-hour period fixed by the Load Dispatch Center of NEA.
In a bid to attract private sector investment in storage hydropower schemes that significantly regulate monsoon water flows, the government has fixed the PPA rates for storage-type projects on the basis of the avoided cost approach. "There could be two approaches applied in such price fixing mechanisms - cost plus approach and avoided cost approach," reads the report.
The report further highlights that the cost plus approach was adopted in India but is not suited to our context. "In the absence of a regulatory commission, it becomes difficult, if not impossible, to adopt a cost plus approach in Nepal," the report states. The cost plus approach is a mechanism for passing on the justified costs of projects to consumers through retail tariff.
"In the absence of a regulatory commission, it becomes difficult, if not impossible, to adopt a cost plus approach for engaging the private sector in storage hydro or renewable power projects. Hence the taskforce used the avoided cost approach for fixing PPA rates for storage-type hydropower projects only," adds the report.
The government has fixed the PPA for ROR type projects that are below 25 megawatts at Rs 8.40 KPH during dry season and Rs 4.80 KPH in wet season.
The PPA for ROR hydro projects between 25 MW to 500 MW is fixed by negotiation with the NEA.
The private sector had long been urging the government to fix the PPA rates for storage-type hydropower projects. "We are hopeful that the private sector will be ecouraged to invest in storage-type projects once the proposed rates are endorsed by the government," the official said.

'Biratnagar Jute Mill will resume operation in a week'

Industry Minister Anil Kumar Jha has said Biratnagar Jute Mill would come into operation within a week.
The minister, who was here to inspect Udayapur Cement Factory, informed that all public enterprises that remained closed would resume operation soon, as "this is the policy adopted by the government".
"The government is working on brining all closed public enterprises, including sick firms, into operation," Jha told local journalists. "The resumption of operation of these public enterprises would generate more jobs and increase the country´s production."
According to Minister Jha, Biratnagar Jute Mill and Birgunj Sugar Mill, among others, would come into operation soon. He, however, did not elaborate.
Minister Jha, on a separate note, said the government was working on developing a separate industrial security force to provide security to industries in the country. "The force will be mobilized in industrial corridors and major industries," Jha said.
He also informed the government´s decision to establish internet zones in all industrial corridors in the country. "With this facility, industrialists won´t have to come to Kathmandu to register their companies," Jha said.

Govt to study actual situation of 'sick industries'

The government is all set to dispatch a team to different parts of country to get real picture of 25 industries that have sought ´sick industry´ facility from the government.
It has already outsourced the task of conducting due-diligence audit of another 12 industries that have sought the facility after conducting field studies.
The Industrial Promotion Division (IPD) under the Ministry of Industry (MoI) has formed a team that will conduct field study to ascertain actual situation of the 25 factories.
“We will conduct due-diligence audit of all the 25 firms after we get their real picture through field studies,” an official at IPD told Republica on Friday.
According to Yam Kumari Khatiwada, chief of IPD, 37 factories have applied for the sick industry facility.
The government has asked MoI to study actual situation of factories that have applied for the facility and recommend their names to the cabinet.
“The firms will get relief package once they get ´sick industry´ status from the cabinet,” said Khatiwada, adding, “The due-diligence audit of the factories will help us identify the kind of support they factories need.”
The team formed by the IPD has been asked to study reasons behind poor performance of the factories that have applied for the facility.
“The government will provide necessary support only to factories that were affected due to external factors such as political instability and energy crisis, among others," the official said. “We won´t be providing any support to factory that failed due to inefficiency of the management.”
Earlier, the ministry had recommended two firms for ´sick industry´ facility to the cabinet. However, the cabinet had returned the names and asked the ministry to recommend facilities required by the troubled factories.
The government had announced relief package for sick industries through its Immediate Relief Program-2011/12.

NIB pushes PDA for 4 big hydropower projects

The government is set to take crucial decisions on expediting key infrastructure projects, including finalization of project development agreements (PDAs) for four mega-hydropower projects, laying the groundwork for a chemical fertilizer project, and conducting a feasibility study for a Kathmandu metro railway.
The secretariat of the Nepal Investment Board (NIB) is submitting proposals on these projects during a meeting of its board of directors (BoD) scheduled for next week.
Issues that top the meeting agenda include finalizing PDAs for the 650 MW Tamakoshi III, 900 MW Upper Karnali, 600 MW Upper Marsyangdi and 900 MW Arun III.
NIB, which is under pressure from line ministries to facilitate implementation of the projects, has been working on finalizing the PDAs with the major power developers, namely, Sutlej Jal Vidyut Nigam, GMR and SN Power.
Sutlej is developing Arun III, GMR is engaged in the development of Upper Marsyangdi and Upper Karnali and SN Power, a Norwegian power developer, is developing Tamakoshi.
"The meeting will also discuss and probably take a decision to conduct a feasibility study on a chemical fertilizer production factory in the country, and to take the Kathmandu Metro Railway project forward," a source close to the Office of the Prime Minister and Council of Ministers (OPMCM) told Republica on Wednesday.
"The NIB secretariat is planning to secure authority from the Ministry of Finance to ask for a budget from the K2 fund -- a fund provided by the Japan government to develop the agricultural sector -- for conducting a feasibility study for the chemical fertilizer factory," the source said.
According to the source, the meeting will also give a nod to the secretariat to ask Nepal Metro Private Limited (NMPL) to develop a detailed proposal for a feasibility study on the project.
NMPL, a company that claims to have lined up international financing for a Kathmandu Metro Railway, had offered to develop the project in August 2012.
Additionally, the secretariat is also mulling over giving impetus to a waste management project in Kathmandu Valley. "The scheduled meeting of the BoD will also take a decision to allow the secretariat to take the waste management project forward," the source disclosed.
In December 2012, the BoD, which is chaired by Prime Minister Dr Baburam Bhattarai, had taken more than half a dozen decisions related to hydropower, including allowing Indian power developers GMR and Sutlej to increase their capital and set up offices in New Delhi.
Sutlej, a state-owned hydropower developer, has been in constant communication with the NIB secretariat to finalize the PDA for the project. "However, it has some reservations on the PDA template which is on the verge of finalization," the source informed.
NIB, which was established more than a year ago to expedite the implementation of mega-projects including hydropower (above 500 MW) in a fast-track mode, is developing a PDA template with the help of Herbert Smith, a legal advisor based in London.

Tapping into the net to lure FDI

• The Ministry of Industry (MoI), an entity that works with the private sector to develop the industrial sector, launched a new portal ´Invest Nepal´ couple of months ago
• The Department of Industry (DoI) is improving its website to provide monthly updates on entry of foreign ventures and foreign direct investment (FDI)[brak]
• Nepal Investment Board (NIB), a high-level government body that facilitates fast-track implementation of mega projects, has developed a website to provide necessary information to foreign investors interested in investing in Nepal
These changes indicate that different government institutions are now tapping into the Internet to lure investors and showcase the country’s potentials.
The ´Invest Nepal´ portal, investnepal.gov.np, reads: "Nepal has embarked on an ambitious plan to raise the living standard of its people through intensive socio-economic changes. Industrialization through active participation of the private sector has been given a high priority."

"The ultimate goal of launching ´Invest Nepal´ was to facilitate international investors vying to invest in Nepal," said Bishnu Dhakal, an under secretary at the MoI. Dhakal, who is in the Industrial Promotion Division of the ministry, further elaborated that investors could take decisions based on information available on the website.
The portal that was developed in coordination with the Confederation of Nepalese Industries (CNI) and the United States Agency for International Development (USAID) guides investors through various steps that need to be taken to invest in Nepal.
"The site also contains information on investment prospects in the country," Dhakal said. “And for those looking for project-specific details, we provide such information based on demand.”
These changes came about after the government declared fiscal year 2012/13 as the Investment Year and announced its plan to channel foreign investment of around US$1 billion in the country to develop large-scale infrastructure projects.
To inform international investors about investment opportunities in almost every sector from agriculture and tourism to hydropower and services, the NIB has developed a website that provides information on projects it has undertaken and domestic policies that foreigners have to abide by while investing in Nepal.
Ditching the traditional paper-based work process, the NIB has also made it clear that it would not entertain project proposals submitted in hard copy format. “All proposals should be submitted via e-mail,” said NIB, which is currently overseeing 14 mega projects, including five large-scale hydropower projects, and is identifying 50 other projects of national interest.
"We have designed a comprehensive website to facilitate international investors. Investors can refer to it prior to booking air-tickets to travel to Nepal," said Mukunda Prasad Poudel, joint secretary at the NIB, whose area of work in interacting with potential international investors.
One of benefits of developing the websites is that they are empowering investors with information, thereby reducing their costs. "Investors should not be spending money just to get basic information on Nepal," Poudel said.
In this regard, the DoI is also refurbishing its website. According to a DoI official, the upgraded version of the website will provide monthly updates on flow of FDI in the country. "This will also help investors to make decisions prior to making investment in Nepal," the official said.
Added Poudel: “Website is a valuable tool to promote our country and investment prospects."

'SEZ committee can recommend incentives for industries'

The Special Economic Zone (SEZ) Development Committee can recommend slew of incentives to industries in the SEZs even though it lacks teeth to announce the incentives on its own.
The government has already issued formation order to form the committee. The committee will formally come into being once the order is published in the Gazette.
"The committee will recommend the government to provide facilities such as subsidy on tax, making warehouse available to the industries, and VAT waiver on raw materials consumed by industries inside the SEZs,” reads the final copy of formation order that will be published in the Gazette soon.
As per the order, the committee, which is chaired by secretary at the Ministry of Industry, will also suggest the government to refund VAT paid while buying machineries by export-oriented industries in SEZs. “It will also request the government to waive off customs duty for the import of three vehicles for export-oriented industries,” reads the order.
Though the formation order lacks the teeth to settle labor issues in SEZs, it authorizes the committee to foster friendly relationship between the management and the workers.
Once the order is issued, the committee will provide one-stop services to entrepreneurs willing to open industries in SEZs.
The SEZ Bill has three principles: incentives to industries, one-spot services and labor flexibilities in the zones. The formation order gives the committee legal authority to work on only one principle - provide one-spot services to industries.
“The committee can only recommend the government to provide incentives to industries and facilitate in resolving labor issues,” an official at MoI told Republica.
As per the formation order, the committee will work in coordination with local administration and police to provide security to industries in SEZs. “The committee will have the authority to regulate industries in SEZs,” reds the order.
According to the order, SEZs will have facilities like banking, postal, health, educational and recreation, among others.
“The industries will have to go through a competitive selection process to get space in SEZs,” states the formation order.

Govt signals awarding tunnel road to NPBCL under BOOT

The government has indicated it is to award construction of the multi-billion rupee Kathmandu-Hetauda Tunnel Highway to the Nepal Purbadhar Bikas Company Limited (NPBCL) under the built-own-operate-transfer (BOOT) model.
The Ministry of Physical Planning, Works and Transport Management (MoPPTM)-- the implementing ministry, after a study of the detailed project report (DPR) prepared by NPBCL, is mulling over signing an agreement with NPBCL and giving it the go-ahead to initiate construction of the project.
"An agreement between the government and NPBCL, awarding the project to the latter, is likely to be signed soon," Tulasi Prasad Sitaula, secretary at MoPPWTM, told Republica.
"We are satisfied with the source of funding and cost of the project proposed by the company," he said.
MoPPWTM, which is overseeing the project, had asked NPBCL to demonstrate strong financial sources and commented on the project DPR.
"NPBCL has presented the financial sources from all different sources," Sitaula said.
Additionally, the company also increased the estimated cost of developing the project from Rs 23 billion to Rs 34 billion.
"NPBCL revised the projected cost after we expressed concern over the previous cost estimate," Sitaula said.
The ministry facilitating the development of the 50-km tunnel highway for connecting Kathmandu and Hetauda had made three comments on the DPR. These concerned sources of financing, cost estimate and project operation period.
NPBCL had asked for a 35-year period to operate the project. But the BOOT Act doesn´t allow the developer more than 30 years for project operation.
The company had submitted its report, claiming that it would generate money from sources such as public investment, a consortium of business groups, investment by non-resident Nepalis (NRNs) and share issue to workers and contractors in return for labor.
According to Lal Krishna KC, vice chairman of NPBCL, the company is also working on generating institutional financing from both the public and private sectors.
The company, which is claiming that it would complete the project within four years, has responded to the government´s concerns. "The ministry will, most likely, take a decision this week," Sitaula said.
Meanwhile, a team of government officials led by Sitaula has visited India to study the effectiveness of projects developed under the public-private-people (PPP) model.
"We visited India to see some of the projects and their viability in India as we don´t have experience of developing such projects in this country," Sitaula said.