Saturday, 2 March, 2024

Financing Arun III

With the establishment of political stability in Nepal following the adoption of the federal constitution and holding of the three-tier elections, the country has gradually been moving ahead on the path of development. With its motto of "Prosperous Nepal, Happy Nepali", the present government is committed to bringing about the much-needed economic transformation in the country. A few important development projects, including road, airport and hydropower infrastructure, are now under construction. The much-awaited Arun III Hydropower Project is among them. The power project has been able to fulfill the conditions of the financing agreement for its development. The SJVN Arun-3 Power Development Company (SAPDC) inked a memorandum of understanding (MoU) for financial closure with Everest Bank Limited and Nabil Bank Limited and five Indian banks in Kathmandu on Thursday. The banks have pledged an investment of Rs. 100 billion in the 900-megawatt project, which is located in Sankhuwasabha district.

Of the total amount, Nepali banks are going to make about Rs. 15.36 billion investment while State Bank of India, Punjab National Bank, Union Bank, Canara Bank, Exim Bank of India will invest around Rs. 85 billion. The Sutlej Jal Vidyut Nigam (SJVN) will mobilise Rs. 25 billion as the equity investment. SJVN is a company owned by the Indian government. The project's estimated cost stands at Rs. 104 billion. However, the project requires additional Rs. 11 billion for constructing the transmission line to supply its electricity. The project's dam site is at Numko Phyaksinda while its powerhouse is located at Pukhuwa of Makalu Rural Municipality. Recognised as a national pride project, it has so far spent about Rs. 14 billion. The project has achieved about 25 per cent progress even before the financial closure. The project is expected to start generating the electricity commercially by the end of 2023. As per the agreement, the power developer company will hand over the project to the Government of Nepal after 25 years in 2048.

The financial closure of this mega hydropower project is sure to help promote Nepal as a secure and suitable investment destination. If the project materialises within the stipulated timeframe, it will become the largest hydroelectricity project being implemented in the country. From this project, the country will get 21.9 per cent, or 197 mw, electricity and 29 per cent equity in the project free of cost. The project is set to issue shares worth Rs. 1.6 billion to the project-affected people in two phases. Each of the project-hit households will also enjoy free electricity up to 30 units a month. As many as 3,000 locals will get employment opportunities during the peak construction period. Apart from creating jobs for the locals, the project will support local industries and fosters entrepreneurship. Apart from creating jobs for the locals, the project will support local industries and fosters entrepreneurship. There will also be better community infrastructures such as roads, bridges, schools and healthcare facilities in the project area. Nepal and India had signed an agreement to develop the project in 2014. Prime Minister KP Sharma Oli and his Indian counterpart Narendra Modi jointly laid the foundation stone of the project in Sankhuwasabha district by pressing a switch from Kathmandu during Modi’s visit to Nepal in May 2018. With the implementation of this landmark project, the country is expected to materialise more similar power projects in the days ahead.