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India-Nepal Begin Talks on Pancheshwar Project;
Oct 09, 2014

Nepal Approves Karnali Project

After many years of delay and uncertainty, India and Nepal resumed talks to build the 5600 MW Pancheshwar multipurpose hydro power project. The talks are a follow up of an agreement reached between both nations during Prime Minister Narendra Modi’s Nepal visit last month to set up a Pancheshwar Development Authority (PDA) within six months. 

It was also agreed that the PDA would finalize the detailed project report (DPR) of the project located on the Mahakali River in the Indo-Nepal border and begin work within a year. 

The Pancheshwar project was part of the 1996 Mahakali Treaty between India and Nepal. There has been lot of opposition to it from environmentalists citing vulnerability of the dam in an earthquake prone zone. 

Besides addressing power needs, once completed the project it is expected to help irrigate large areas in north India and help mitigate floods. 

Karnali Project: After much deliberations and delay Nepal has finally approved the project development agreement (PDA) of the 900 MW Upper Karnali project to be developed by India’s GMR Group. The final draft of the agreement was approved by Investment Board of Nepal (IBN). Nepal’s cabinet. 

The project has been in pipeline for several years and during Prime Minister Narendra Modi’s Nepal visit last month both countries had agreed to sign the PDA within 45 days. As per the agreement, IBN has agreed to pay GMR, NRs 5 million (Rs 3.12 million) per MW as value added tax (VAT) exemption. 

Located in Surkhet, Accham and Dailekh districts of Nepal, the project was awarded to GMR in 2008 after a global bid. It was agreed that GMR would provide 12% free electricity and 27% free equity to Nepal government. As per the agreement, GMR will hand over the project and the transmission lines to Nepal government 25 years after power generation begins. The project is expected to be completed by 2022-23. 

To be constructed at an estimated cost of NRs 140 billion (Rs 87.5 billion), the project will be one of the largest hydro power projects in Nepal and the one with the biggest foreign investment till date. This could be a milestone for the development of the hydro-power sector and to attract foreign investment in Nepal. 

According to estimates, Nepal has a hydro-power potential of nearly 83,000 MW, but the country generates less than 1000 MW and there is nearly 16-18 hours of load shedding during winter. 


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