The government on Friday decided to develop the Budhi Gandaki Hydropower Project on its own, nearly two weeks after it terminated the contract agreement with the China Gezhouba Group Corporation (CGGC) to build the country’s largest hydroelectric project.

The reservoir-type 1,200 MW project lies in Gorkha and Dhading districts.

“We have decided to build the national pride project by mobilising national resources and technology,” Deputy Prime Minister Kamal Thapa, who is also the minister for energy, said on Friday. “Instead of engineering, procurement, construction and finance (EPCF) model planned earlier, the Nepal Electricity Authority has tasked with building the project on the engineering, procurement and construction (EPC) model.” Normally, the EPC contractor has to execute and deliver the project within the agreed timeframe and budget. It is commonly known as a lump sum turnkey contract where the agreement places the risk for schedule and budget on the EPC contractor.

The Cabinet on May 23 had decided to award the contract to construct the $2.5-billion project to CGGC. Subsequently, on June 5, the Ministry of Energy signed a memorandum of understanding (MoU) with the Chinese company to build the project under the EPCF model.

The project was also listed as a component of the Belt and Road Initiative (BRI), the China-led plan that envisages greater trade and connectivity and supports varied infrastructure projects.

However, concerns were raised by now-dissolved house committees stating that the government’s decision to hand over the project to the Chinese company was against the country’s legal premises and breached the Public Procurement Act.

The government had been criticised for not holding free competition before deciding on the company to undertake the hydroelectricity project.

The parliamentary committees had then directed the government to scrap the project.

On November 13, the government scrapped the agreement signed with the Chinese company. Budhi Gandaki has been highlighted as a key project to resolve the country’s perennial power crisis.

The government has listed it as a national pride project.

The government has allocated Rs10.17 billion for the distribution of compensation and operational expenses for the project this fiscal year.

The national pride project is expected to affect over 8,000 households in Dhading and Gorkha districts.

The reservoir of the storage project will submerge 3,560 houses and partially affect 4,557 households. The government has decided to provide compensation ranging from Rs524,000 to Rs835,000 for each ropani of land that locals have to let go for the project.

In the first phase of compensation distribution programme launched in the last fiscal year, owners of around 8,000 ropanis of land had received compensation.

In the second phase, the project intends to compensate owners of 11,478 plots of land in Dhading and 11,462 plots of land in Gorkha.

Since the last fiscal year, the government has been collecting money through the Nepal Oil Corporation (NOC) to develop the project. In the past 16 months, the state-owned oil monopoly has collected more than Rs13 billion from consumers.

The corporation has been collecting Rs5 on each liter of diesel, petrol and aviation turbine fuel in the name of infrastructure tax.

• The Budhi Gandaki Hydroelectric Project is the largest hydel electricity project in Nepal with a capacity of 1,200 MW
• The reservoir-type 1,200 MW project lies in Gorkha and Dhading districts and has been included in the national pride project list
• The Pushpa Kamal Dahal-led Cabinet on May 23 had decided to award the contract to construct the project to CGGC
• The Ministry of Energy signed an MoU with the Chinese company to build the project on June 5
• The Sher Bahadur Deuba-led govt on November 13 terminated the agreement with CGGC, saying there were some procedural flaws while awarding the contract
• The left alliance of the CPN-UML and the CPN (Maoist Centre) has objected to the govt move of scrapping the contract with CGGC
• The govt on Nov 24 said it would build the project on its own