MoE suggests MoF to give incentives to 7 hydro projects
KATHMANDU, JUN 09 -
The Ministry of Energy (MoE) has recommended the Ministry of Finance (MoF) to provide concessional loans and value added tax (VAT) exemption on construction materials to seven hydropower projects as pledged in the government’s Load-shedding Reduction Action Plan.
The action plan has pledged four types of support, including concessional loans, VAT waiver on construction materials for projects that are in final construction phases, waiver of delay charge and hike in power purchase agreement rate.
The projects for which the MoE has asked for facilities from the Finance Ministry are Andhi Khola, Lower Modi, Lower Balefi, Madi Khola-1, Indrawati Khola, Jumdi Khola and Upper Madi Khola.
Currently the average cost for hydropower projects stands at Rs 140 million per megawatt. The action plan has pledged providing soft loans worth Rs 20 million per megawatt at an interest rate of around 7 percent.
“The ministry has received applications from 50 projects seeking the facilities,” said Energy Secretary Hari Ram Koirala. “Once these seven projects will be approved for getting the facilities, the ministry will recommend other projects.”
According to Koirala, projects that are in construction phase will be recommended first. Of the 50 projects that have applied for the facilities, 33 are currently under construction, while the remaining 17 have signed PPA with the Nepal Electricity Authority, but have not begun construction.
According to the MoE data, the 33 projects that are currently under construction will generate 250 MW electricity and the other 13 will generate over 100 MW within 2071.
Other projects claiming the incentives include Akhu Khola, Spring Khola, Middle Chaku Khola, Lower Chaku Khola, Chaku Khola, Upper Mailun A, Lower Chaku Khola A, Jiri Khola, Pikhuna Khola, Jhyadi Khola and Bhairavkunda.
Independent power producers had long been seeking the government’s support, citing difficulties in completing construction such as high bank rates and low PPA rate.
“As the entire hydro development sector of the country is facing hardships due hydropower companies’ poor financial health, the government’s timely supportive measures are crucial,” said Subarna Das Shrestha, president of Independent Power Producers Association of Nepal. He also asked the government to increase the loan payback period to seven years.
The plan, however, says if projects, after receiving the facility, fail to generate energy by 2014, they should pay a delay charge worth double the amount.
Finance Ministry officials said the ministry was positive about MoE’s recommendations. They said the ministry has formed a taskforce to study ways to ensure necessary resources. The taskforce has been formed to explore ways to mobilise the pledged resources to hydropower projects to ensure their timely completion and help reduce load-shedding hours, said Finance Ministry spokesperson Rajan Khanal.
Khanal, however, said the ministry cannot give VAT waiver on construction materials as the tax law is against such a provision. Ministry sources say there has been an understanding to give Rs 2 billion to the projects.
Source: The Kathmandu Post
