Land acquisition for the much-awaited Upper Karnali Hydropower Project has hit a snag after the developer and owners of 49 hectares of private land failed to agree on the compensation amount.

Residents who will be displaced by the 900 MW project in western Nepal got upset after the Price Determination Committee was told by the project developer GMR Upper Karnali Hydropower that it would not be able to meet their demand.

“The rate offered by our company is very reasonable considering the market rate prevailing in the area.

So we are unable to increase the rate offered by us,” Bam Bahadur BC, a local leader involved in the negotiations, quoted the letter from GMR as saying.

The project-affected people have demanded Rs1 million per ropani while GMR has offered Rs760,000.

“On Monday, we wrote back to GMR asking them to be more flexible on the rate and sit for another round of negotiations,” said BC who is also a member of the Price Determination Committee. “The project officials who received our letter said they would forward it to the higher authorities and arrange a meeting as soon as possible.”

BC said that they also held informal talks with project officials while handing over the letter.

“We have asked them to expedite the land acquisition process or leave the project site,” he said.  

Sources at Investment Board Nepal (IBN) said a deal would be concluded very soon. “Locals will lower their demand and the developer will hike its offer slightly,” said the IBN source involved in informal talks with the two parties. “The most likely compensation amount would be Rs800,000 per ropani.”   

Land acquisition has become one of the major headaches for hydropower project developers of late as they have to complete it before the financial closure.

The government and GMR India signed a project development agreement (PDA) for the construction of the Upper Karnali project in September 2014 under which the financial closure has to be completed by September 2016.

Last April, a project appraisal team of the Asian Development Bank (ADB), International Finance Corporation (IFC), International Bank for Reconstruction and Develo-pment (IBRD), Commonwealth Development Corporation (CDC), DEG, a subsidiary of German Development Bank, Japan International Cooperation Agency (JICA) and OPEC Fund for International Development (OFID) held a tripartite meeting with IBN and GMR in Kathmandu for possible financing of the project.

Highly-placed sources have confirmed that this group of lenders have pledged loans totalling more than $1 billion.

The Upper Karnali project is spread over three districts—Surkhet, Dailekh and Achham. The developer will give 27 percent of the shares to the government and the country will also receive 12 percent (108 MW) of the total energy produced for free.

Similarly, the project is expected to create 2,000 jobs and the government is projected to earn Rs300 billion in financial benefits. The project will be acquiring 48.85 hectares of private land and 207.75 hectares of government-owned land. It will affect an estimated 239 households.