Government, Sutlej confident of inking key deal on Arun-III

The development of one of the largest hydropower projects in the country, the 900-megawatt Arun-III, has picked up momentum after 30 years of fuss and floundering, with the government and Indian power developer Sutlej Jal Vidyut Nigam Ltd (SJVNL) finally beginning negotiations on the project development agreement (PDA). The government and SJVNL have both expressed a high level of confidence that the key agreement for commencing the project construction would be inked. The Investment Board of Nepal (IBN) and SJVNL kicked-started the PDA negotiations last week. “We started negotiations with SJVN and things are taking a right direction,” Radesh Pant, chief executive officer of IBN, told Republica on Thursday. Expressing confidence over developing the project, R. P. Singh, chairman and managing director of SJVNL, said there was no fear of losing the project. “Now the project is moving. The PDA discussions are on. It is right that the PDA was submitted around two years back. What can we do, this is the way with Nepal, our partners on the project,” reports Live mint, an Indian newspaper, quoting Singh. “I am quite sure, the way the negotiations are on with IBN, that it will be sorted out.” The development of the project, which has always gotten politicized, seems finally to be happening as both the government and the developer express the same level of confidence. “I am sure the deal will be sealed. But I can’t say whether it will take just a few weeks or around a year to finalize all the terms and conditions of the PDA,” Pant said. The project based in Sankhuwasabha district was initially scheduled to be developed by the government itself with the assistance of the World Bank. James Wolfensohn, then president of the World Bank, cancelled the project development in August 1995 in agreement with the CPN(UML)-led government, after a telephone conversation with then prime minister Manmohan Adhikari, according to a World Bank news release. SJVNL, which has agreed to provide 21.9 percent of the power generated from the plant to Nepal free of cost, is yet to finalize different issues related to the PDA. The export-oriented project will get a generation license from the government after it demonstrates strong enough financial resources. SJVNL is targeting to utilize the energy generated from the project to meet the growing demand for electricity in the Indian market. “SJVNL itself seems enthusiastic to take the project forward but it might just be a gesture,” said a legal advisor associated with Herbert Smith, an international legal advisory body based in London. Herbert Smith, which developed the PDA template -- a baseline document for PDA negotiations -- is also supporting IBN to negotiate with the developers. SJVNL had already submitted a detailed project report for Arun-III in 2011. The report is still under consideration. The government has handed over the project to SJVNL under a built-own-operate-transfer (BOOT) scheme for 30 years. It is still unclear exactly how all the issues related to the project will move forward, Pant said. Large export-oriented hydropower projects have been politicized in the past, mainly by the ultra-leftist forces. The Mohan Baidha-led CPN-Maoist is still against projects such as Upper Karnali, Upper Marsyangdi and Arun-III, in which Indian developers are involved. Quoting former Indian ambassador to Nepal Shiv Mukherjee, Live mint has written, “Hydroelectric power and its potential have been highly politicized in Nepal. I won’t comment on specifics…”