A provision in the electricity bill allowing the government to grant a licence without competition to any joint venture entity between Nepal and foreign government entities to develop hydropower projects over 100MW has invited the ire of Nepal’s private sector.

They are of the view that the provision not only deprives the domestic private sector of an opportunity to develop medium-sized projects but could increase the entry of the Indian state-owned companies at the expense of the domestic private sector.

“Nepali developers are themselves capable of developing projects upto 500MW,” said Ganesh Karki, president of the Independent Power Producers’ Association of Nepal (IPPAN). “Why grant a licence without competition for projects above 100MW?”

The private sector is also of the view that the provision would open the doors for Indian state-owned companies to develop more hydropower projects in Nepal at a time a section of stakeholders has expressed concern over increasing “Indian control” of Nepal’s rivers.

“As domestic demand for electricity is limited, Nepal has to boost exports to India, the natural market,” said IPPAN President Karki. “The provision in the bill could benefit Indian state-owned companies to get licence for developing medium-scale hydropower projects too.”

However, the bill, which is under consideration of the federal parliament, does not bar a government entity of a country from entering into a joint venture with Nepal’s state-owned entities to develop projects with capacity over 100MW.

The Nepal Electricity Authority (NEA) and the SJVN Limited have signed a memorandum of understanding (MoU) to develop the 490MW Arun 4 hydropower project while India’s NHPC Limited and Nepal’s Vidhyut Utpadan Company Limited have agreed to develop the 480MW Phukot Karnali hydroelectric project.

These agreements were signed based on government-to-government understandings.

The government had handed over the survey licence of the 669MW Lower Arun Hydropower Project to the SJVN Limited. Likewise, the licence for the development of 750MW West Seti Hydropower Project and the 450MW Seti River (SR-6) was granted to the NHPC Limited without competition.

China Three Gorges Corporation was earlier given the licence to develop the West Seti Project without competition. After the Chinese company delayed its implementation, the government terminated the agreement with it and enlisted the Indian company.

Critics have been questioning the tendency of handing over the country’s key projects to foreign companies without competition allegedly to appease a particular country.

As India does not allow the import of power from projects developed with Chinese involvement, stakeholders say it is mostly Indian state-owned companies that will benefit from the bill’s provision.

It is not that the Electricity Act 1992 in force does not authorise the government to hand over any hydropower project to domestic and foreign companies without competition.

Section 35 of the law says, “notwithstanding anything written elsewhere in this Act, Government of Nepal, by entering into a contract with any person or corporate body, may do or cause to do the generation, transmission or distribution of electricity subject to the terms and conditions as mentioned in such contract”.

But the private sector complains that the proposed bill has paved the way for handing over medium-sized projects to joint ventures involving Nepali and foreign state-owned entities.

Currently, the Nepal government has been granting licences to foreign companies without competition only in the case of large projects, despite having the authority to hand over smaller projects too.

Government officials say that increased participation of Indian companies in Nepal’s hydropower development was necessary to ensure easy access to Indian markets as the domestic market has failed to grow as expected.

Nepal’s generation capacity has reached around 3,000MW but the country's peak-hour demand is only around 2,000MW, according to the NEA.

“Foreign companies from India or other countries, who join hands with Nepali state-owned entities, also have to follow Nepal’s laws while operating here,” Singh said. “As India is a big market for Nepal’s power, it will be easier for projects with Indian investments to get access to the vast Indian market.”

The southern neighbour has promised to buy 10,000MW of electricity in 10 years under a long-term power trade agreement signed in early January.

According to another official at the energy ministry, the bill does not intend to hand over projects to Indian companies but the likelihood of Indian companies benefiting from the provision cannot be ruled out.

“Our nearest market is India while we don’t have any transmission connectivity with China,” said the official. “So it is natural for Indian companies to be eager to develop projects in Nepal with an eye on their own market.”