Budhi Gandaki Jalbidhyut Public Limited, which was formed in early September for developing the 1200MW Budhi Gandaki Hydropower Project, is awaiting approval from the Office of the Company Registrar to start work on the project.

The project to be built in Gorkha and Dhading districts, will be Nepal’s largest reservoir-type plant and has a price tag of $2.6 billion. Construction is expected to run for eight years.

The company, however, has not been able to begin its work as it is yet to get an approval for the same from the Office of the Company Registrar, according to Sunil Poudel, joint secretary at the Ministry of Energy, Water Resources and Irrigation. “The Company Registrar’s Office has not granted the approval to start the work because we have not been able to show the required cash balance,” he said.

As per the section 63 of the Company Act 2007, no public company incorporated under the Act can commence its business without obtaining the approval to carry on its business.

Poudel, who is also a board member of the newly formed company, said they have sought a pledge for around Rs10 million from the Finance Ministry for getting approval to start the work.

“We have yet to get such a pledge. It may be because the finance ministry is undecided on the matter in view of the election code of conduct,” said Poudel. “The board will make plans on how to move forward to develop the project including the financial closure.”

Budhi Gandaki is a ready-to-go project as its detailed project report (DPR) has already been prepared and the task of compensation distribution for the acquired land and houses is also close to completion.

“Now, the biggest challenge will be to generate the funds necessary to develop the country’s largest project,” Poudel added.

A committee headed by then vice-chairperson of the National Planning Commission, Swarnim Wagle, had suggested that the government develop the project on its own by providing viability gap funding, covering around one-third of the project development cost.

In its report, the committee said the government could cover the cost of land acquisition and resettlement of displaced families which could total as high as Rs94 billion.

According to the report, a significant chunk of resources can be gathered through self-financing by government institutions. An infrastructure tax being imposed on imported fuel could be an important source of revenue that can be used to develop the project, the report suggests.

“As much as Rs164 billion could be collected by the fiscal year 2026-27 based on an increase in petroleum consumption by 10 percent a year,” the report reads. But the estimated tax collection is based on Rs5 per litre infrastructure/carbon tax that the government has been imposing since 2015.

In May 2015, the government decided to levy Rs5 tax per litre of petroleum products (barring cooking gas) on consumers to develop the Budhi Gandaki project. According to the Nepal Oil Corporation, more than Rs22 billion in revenue was collected under the header ‘Budhi Gandaki project.’

In the fiscal year 2018-19, then finance minister Yuba Raj Khatiwada changed the name of the heading to ‘infrastructure development tax.’ The tax was also raised to Rs10 per litre of petroleum products.

Nearly Rs100 billion has been raised in infrastructure development tax, Nepal Oil Corporation officials told the Post in early September. The oil monopoly had also requested the government to give it a certain percent of share in the project if the tax on petroleum products is continued.

Besides infrastructure tax, financing from government entities like Nepal Electricity Authority, Employees Provident Fund, Nepal Telecom, Rastriya Beema Sansthan, Hydroelectric Investment and Development Company, Upper Tamakoshi Hydropower Company, Chilime Hydropower Company, Nepal Army, Nepal Police and the General Public could be tapped for the project, the report suggests.

Resources can also be generated from international donor agencies or through the issuance of project-specific bonds and credits from the project’s suppliers, according to the report.

“Before exploring these options, the company should take necessary decisions from the board of directors and appoint the chief executive officer and other employees,” said Poudel.

The government, nonetheless, has already decided that it will bear the cost of land acquisition. According to Jagat Kumar Shrestha, coordinator of the Environment, Compensation Distribution, Resettlement and Rehabilitation Unit of the project, the government has already spent around Rs41 billion for the purpose.

According to him, compensation worth around Rs35 billion has already been provided for 48,900 ropanis of land acquired for the project, while additional compensation has been paid for houses, animal sheds and crops to be affected by the project.

The project needs to acquire 58,000 ropani of land. “The government will have to compensate an additional 1,000 families for houses, crops and sheds,” said Shrestha.

The project which is envisaged to ensure energy security for Nepal for the coming decades has been in limbo due to the uncertainty over its funding modality.

Nepal's most talked-about project has been pulled back and forth by successive governments, preventing it from taking off for decades.

In 2017, the Pushpa Kamal Dahal-led government awarded a contract to build the project without competitive bidding to China Gezhouba Group Corporation (CGGC) under the engineering, procurement, construction and financing (EPCF) modality.

The decision to award the contract to the Chinese developer was cancelled by the then Sher Bahadur Deuba government in November 2017, citing procedural flaws.

Again in September 2018, the project got engulfed in politicking. The then KP Sharma Oli administration decided in favour of the Chinese company, reverting the Deuba government’s decision to develop the project with Nepal’s own resources.

With the Chinese company making no progress on the project, the Sher Bahadur Deuba administration, in April this year, again decided to revoke the licence issued to the CGGC. Then the government announced that the project would be built by mobilising domestic resources. The storage project will generate 3,383 GWh of energy annually.

The key project structure is a double curvature arch dam that rises 263 metres above the foundation. It will create a lake behind it to store water to turn the turbines to generate 1,200 megawatts.