Developers of small hydropower projects now qualify for cheap loans under the central bank's refinance facility.

Nepal Rastra Bank has amended the working procedure for refinancing and categorised hydropower projects with a capacity of less than 10 megawatts as beneficiaries under the special refinance facility, making them eligible to borrow funds at a maximum of 3 percent interest.

Under the special refinance facility, the central bank issues matching loans at 1 percent interest to banks and financial institutions that have provided credit to targeted borrowers.

“The main reason behind categorisation of small hydropower projects as beneficiaries of special refinance facility is to help certain hydropower projects which are having a hard time repaying loans after facing various problems,” said a senior central bank official who wished to remain unnamed because a recent communication policy allows only spokespersons to speak to the media.

“We have received a list of 37 troubled hydropower projects with a capacity of less than 10 megawatts.”

According to the central bank official, the Independent Power Producers of Nepal submitted a list of the troubled schemes, and the Electricity Regulation Commission recommended providing them certain concessions.

“Some got into difficulty because of high production costs while others witnessed lower energy production than anticipated and some had high operating costs,” the official said.

The central bank has aimed to provide relief to a wider variety of small projects by amending the working procedure. Along with export industries, enterprises run by women and disabled people get refinance facilities at cheap interest rates.

Shailendra Guragain, former president of the Independent Power Producers of Nepal, said that the central bank’s move was a welcome development. “It will assist small hydropower projects to repay their loans although the interest rate in the market has also come down lately,” he said.

The central bank said it expanded eligibility for refinance as there were few takers from among small and medium scale enterprises affected by the Covid-19 pandemic.

In order to help small and medium scale enterprises with refinance facility, the central bank had introduced the policy of providing loans of up to Rs50 million to each enterprise in a bulk approval process.

Under this modality, 70 percent of the total planned funds should have been provided. The central bank said it approved refinancing amounting to less than half of the Rs200 billion set aside for refinance funding under the bulk category.

Applications for refinance from micro enterprises through micro finance institutions too amounted to less than half of the available funds under this category.

“While demand for refinance facility of more than Rs50 million, which is provided on a case to case basis, remains high, we have made it easier for them to get refinance by dipping into funds meant for other categories,” said the central bank official.

According to the central bank, it has provided Rs142 billion in refinance facilities so far.