Experts for issuing hydropower licenses through open competition

KATHMANDU, Dec 19: Experts say the existing law of providing survey license of hydropower projects on ´first come, first serve basis´, which was endorsed in early 1990s, is creating problems in the hydropower sector. As per the Electricity Act, survey licenses are given initially for two years. They can be renewed by a maximum of three years. Licenses of over a dozen projects have expired. A recent direction by the Commission for the Investigation of Abuse of Authority (CIAA) to scrap license of such projects landed in controversy. Two parliamentary committees separately started discussions on the issue, questioning jurisdiction of CIAA. The committees invited both government and CIAA officials for the discussions. During the discussions, some lawmakers threw their weight behind the developers of hydropower projects whose licenses have already expired. Some license holders are occupying rivers by doing nothing at all. Despite this, their licenses get renewed because of their political nexus. However, not all developers fall in this category. After a discussion of nearly six weeks, the latest direction of the Agriculture and Water Resources Committee (AWRC) of legislature-parliament has finally settled the dispute. But officials of Department of Electricity Development (DoED), the government agency responsible for issuing hydropower licenses, say the dispute over licenses has just started. As licenses of many hydropower projects are expiring in the next few months, they say the dispute will be bigger this time. DoED has issued survey licenses for generation of altogether 13,289 MW. Officials say almost every stretch of rivers has been occupied. "The practice of awarding survey license on ´first come, first served basis´ is the root cause of the problem,” said Sagar Raj Gautam, information officer of DoED, told Republica. There are several problems that genuine hydropower developers come across after acquiring survey license. These problems range from hurdles by locals, problems in felling trees and finding investors to convincing Nepal Electricity Authority (NEA) to buy energy generated by the project. Lack of transmission line in the project site also creates problems for the developers. It takes lot of time to combat these problems. Some developers lose license just because they fail to combat these problems in time. If their licenses are scrapped, they will have face huge loss. Energy Secretary Rajendra Kishore Kshatri recently told parliamentary committees that survey period of five-year is not practical. "License holders need to do many things. Weaknesses on the part of the government like delay in signing power purchase agreement (PPA) and building transmission lines also affect their works," he added. At present, many developers have remained idle as NEA is not signing new PPA. Before signing PPA, projects cannot start construction works. OPEN COMPETITION Experts say the existing licensing system and allowing developers to modify projects on the basis of their financing capacity is not relevant in present context where developers are jostling to put their money into hydropower projects. Only a few developers had shown interest to invest in hydropower projects when the government opened doors for private sector investment two decades ago. Government officials and independent power developers have common view on hydropower development. They say the government should first identify projects and complete preliminary study and award it to the private sector though open bidding. Dinesh Ghimire, director general of DoED, said discussion on awarding projects through open bidding is underway. "The government should identify the project on its own for optimum capacity utilization of the projects. It can identify the projects on the basis of available infrastructures like access roads and transmission lines," added Ghimire. However, a draft of the bill to amend the Electricity Act does not include anything about open bidding. Khadga Bahadur Bisht, president of Independent Power Producers´ Association, said open bidding is the best model for project development. "Competition in energy prices will also provide opportunity for the government to purchase cheap energy and keep energy prices at the competitive level, he added. Gautam is it is high time the government stopped the existing licensing system. "It should analyze the existing hydropower development process, conduct a need assessment analysis, and award the projects to developers through open competition," he added. Former Energy Minister Gokarna Bista had tried to bring the scrapped licenses in the government basket and award it to interested developers through open bidding. The energy ministry had even issued a directive in 2011 for managing survey licenses and bringing the scrapped licenses in the government basket. However, the directive was amended later on to serve the interest of some groups.