KATHMANDU, Sept 19: Governor of the Nepal Rastra Bank (NRB), Maha Prasad Adhikari, has said the situation of trade deficit would end if power worth Rs 130 billion is exported annually.

During a meeting with the office-bearers of the Independent Power Producers' Association, Nepal (IPPAN), Governor Adhikari mentioned that power export would be the best medium to reduce the balooning trade deficit. 

NRB is to provide necessary facilitation in the development of the hydropower sector, Governor Adhikari asserted.

On the occasion, IPPAN President Ganesh Karki urged Governor Adhikari to make a provision requiring banks and financial institutions to invest 20 percent of their total investment in the energy sector.

In response, the Governor shared that there was no problem of investment with banks even if 20,000 megawatt electricity is produced in 10 years. 

However, IPPAN said around Rs 555 billion is needed within five years while developing projects for generating around 3700-megawatt power, around Rs 2,055 billion is needed in 10 years if power export agreement between Nepal-India is added and more than Rs 3,750 billion if additional 25,000-megawatt electricity is produced as per the declaration of Energy Decade.

As NRB is providing loans to projects with the capacity of producing more than 200-megawatt by adding only one per cent to the base rate, IPPAN representatives requested the central bank to implement this arrangement in all hydropower projects. 

IPPAN further said banks and financial institutions have not shown interest in further investing in hydropower projects due to the directives issued by the Nepal Rastra Bank for banks and financial institutions. 

As per the directives, the interest income of the under-construction period could not be distributed as dividend.

IPPAN also demanded the continuity of sharing of bonuses for the interests generated during the construction phase. It has sought the government role for management of new financial instruments such as green bonds, climate bonds or sovereign bonds from the international market. They also want the Nepal Rastra Bank (NRB) to ensure reloan in clean energy, citing high interest rates for investments by financial institutions in energy.

In response, the NRB governor said though the matters relating to bonds fall under the jurisdiction of the Finance Ministry, the central government is ready to facilitate.

IPPAN has also requested the central bank to make provisions allowing banks and financial institutions to invest in energy production as capital. They also want rules and provisions related to investment, bonuses, and withdrawal of investments for international investors to be eased to achieve the ambitious goal of generating 25,000 megawatts of electricity in the next decade.

IPPAN has urged revisions to the NRB unified directives regarding the risk weight of hydropower projects. They propose reducing the risk weight for operational projects from 100 to 50 percent and to 75 percent for under-construction projects.

Moreover, the team called on the NRB to develop progressive policy provisions that ensure interest grants, refinancing, interest capitalization, debt restructuring, and an extended moratorium period for rebuilding hydropower projects damaged by water-induced disasters.

Present at the meeting were NRB Deputy Governor Bam Bahadur Mishra, executive directors Dr Gunakar Bhatta, and Dev Kumar Dhakal. The IPPAN delegation, led by President Karki, includes Vice President Mohan Kumar Dangi and former President Shalendra Guragain, among others.

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