The decision has paved the way for the Indian developer to attain financial closure for the 900 MW project within September, the deadline set for this task. The project is expected to be completed by September 2022.
KATHMANDU, Feb 23: The Indian government has sanctioned an investment of Rs 91.58 billion (Indian Rs 57.24 billion) by the Satluj Jal Vidyut Nigam Limited (SJVNL) for the development of the 900 MW Arun III Hydropower Project, giving new momentum to the project that was first mooted by Nepal some three decades ago.
According to a statement posted by Press Information Bureau of the Indian government on its website on Wednesday, the Indian cabinet's committee on economic affairs chaired by Prime Minister Narendra Modi took the decision. The decision has paved the way for the Indian developer to attain financial closure for the project within September, the deadline set for this task.
The Indian government has approved the investment proposal for generation component of Arun III Hydropower Project in Nepal by SJVN Limited, a central public sector enterprise of the Indian government, nearly after nine years of signing of the Memorandum of Understanding between the Nepal Government and SJVN Limited for the project. The MoU was signed in March, 2008.
SJVN Ltd has registered SJVN Arun-III Power Development Company (P) Limited (SAPDC) as its 100 percent subsidiary for implementing the project.
The hydropower project that was abandoned by the World Bank in 1994 over some political issues, was pursued by the Indian developer under the Build-Own-Operate-Transfer (BOOT) model for a period of 30 years including five years of construction period. The Investment Board Nepal and the SJVN Limited have signed a project development agreement on November 25, 2014, during the official visit of Indian Prime Minister Modi to Nepal. According to the PDA, the project shall provide 21.9 percent free power to Nepal for the entire concession period of 25 years.
"The project will provide surplus power to India strengthening power availability in the country and will also strengthening economic linkages with Nepal. The power from the project shall be exported from Dhalkebar in Nepal to Muzaffarpur in India," read the statement.
While the Indian government has sanctioned the investment of Rs 91.58 billion, the Nepal government will provide Rs 4.5 billion as grant to the developer. The project is estimated to cost Rs 104 billion.
Similarly, the developer will enjoy income tax holiday for the first 10 years of power generation and 50 percent tax waiver for another five years if the project starts generation by 2022/23. The project is expected to be completed by September 2022.
IBN CEO Maha Prasad Adhikari told Republica that the decision of the Indian cabinet committee will make it easier for the developer to carry out necessary work in Nepal as well as sign a power purchase agreement. "The decision will clear all constraints toward their side in arranging resources," he added. The project is expected to generate 3,000 construction employments.