NRB plans to offer hydel projects refinancing help
KATHMANDU, DEC 02 -
Amid hydropower developers complaints that high bank interest rates are making projects unfeasible, the Nepal Rastra Bank (NRB) is planning to provide projects with comfortable refinancing facilities.
One-and-a-half months ago, 28 projects promoted by the private sector had knocked on the government’s door, seeking relief measures. Projects, including Tamakoshi, Modi and Maikhola, had formally asked the Ministry of Energy to declare them sick and provide necessary relief such as relaxation in bank rates. Over the last two years, interest rates have increased by 5-7 percent points.
“As the refinancing window currently being offered to industries, including sick, exports and others, has remained largely unused because of ‘procedural complications’, we want to make the provision for hydro projects much easier,” said a senior NRB official. “We are now working on the refinancing modality.”
According to the official, the refinancing will be provided under articles 49 and 50 of the NRB Act 2002. The articles provision refinancing for a maximum of six months, and if the government puts its securities as guarantee and seeks refinance in public interest, it can be provided for up to one year.
Under its refinancing provision, the central bank provides loans to BFIs at lower-than-market interest rates and BFIs will lend to projects at the rate fixed by NRB.
Currently, the central bank provides loans at 1.5 percent to BFIs for refinancing the export industry, sick industries, small and cottage industries, and targeted groups for foreign employment. And, BFIs should provide loans to these sectors at not more than 4.5 percent.
Alarmed by the worrisome scenario of the hydropower sector, the government has adopted a policy to offer value added tax (VAT) exemption on construction materials instead of subsidising bank rates. The official said the central bank is also considering other facilities instead of interest rate relaxation given that they can enjoy the refinance facility easily. According to NRB, there has so far been little use of the refinancing window for sick and export industries.
Independent power producers have demanded that either interest rates be relaxed or refinancing be provided or projects be purchased by the Nepal Electricity Authority. They have also demanded hike in the power purchase agreement (PPA) rate.
Source: Kantipur
