Budhi Gandaki Hydropower Project, once again, has fallen into politicking. The KP Sharma Oli administration last week decided to rope in China Gezhouba Group Corporation (CGGC), reverting the erstwhile Sher Bahadur Deuba government’s decision to develop the 1200MW project with internal resources.

The Cabinet meeting on Friday directed the Energy Ministry to initiate the process to award the project to the Chinese developer. As per the Cabinet decision, the ministry has been asked to hold talks with the Gezhouba, prepare a proposal, and strike a deal to execute the $2.5 billion reservoir project.

Following the government decision, the Energy Ministry will now invite the Chinese company for talks and prepare a draft of the memorandum of understanding (MoU) before signing it, according to multiple sources at the ministry. “The understanding will be signed to execute the project under the engineering, procurement, construction and financing (EPCF) model,” said one senior official.

Multiple sources at the Energy Ministry said the proposal was taken to the Cabinet directly by the Prime Minister’s Office (PMO) without involving Energy Ministry officials. “We came to know that the Chinese developer had filed an application at the prime minister’s office, expressing interest in executing the project under the EPCF model,” said another official who spoke on condition of anonymity because he wasn’t allowed to discuss details of the proposal.

Energy Secretary Anup Kumar Upadhyay, however, said he was unaware of the recent development and has yet to receive instructions from the PMO.

This is not the first time that the government has roped in the Chinese developer to develop the Budhi Gandaki project. The Pushpa Kamal Dahal-led government had, in May 2017, also signed an MoU with the CGGC to execute the project under the EPCF model. The agreement invited controversy as the project was handed to the Chinese company without initiating a competitive bidding process.

However, the Deuba administration scrapped the deal in November last year citing irregularities. After cancelling the agreement with the Chinese company, the Deuba government set plans to build the project using domestic financial resources via the state-owned Nepal Electricity Authority. Subsequently, a committee was formed under then-National Planning Commission Vice-chairman Swarnim Wagle to explore financing options to build the power plant.

The Wagle-led committee had suggested that the government develop the project on its own by providing viability gap funding, covering around one-third of the project’s development cost. The Cabinet meeting during the Deuba administration approved the committee report and agreed to provide the gap funding.

But the plan never materialised as the government changed before the decision could be minuted. The new administration under Oli, who had publicly criticised Deuba’s decision to scrap the deal with the Chinese company, disowned the previous administration’s decision.

Experts criticised Oli administration’s decision to rehire the Chinese company to develop the project without competitive bidding, saying such an act might make the project expensive. “There is no problem executing the project with foreign investment. But the government should have awarded the contract in a transparent manner via global tender,” said Wagle, the former NPC vice-chairman. “The way the decision was made gave enough room for irregularities.”

Initially, the project was supposed to be developed under a development committee model. In 2011, the Baburam Bhattarai-led government had formed the Budhi Gandaki Hydroelectric Project Development Committee to execute the project.

The Budhi Gandaki project has been touted as a key project to resolve the perennial power crisis in the country. The Dhading and Gorkha district administration offices are currently distributing compensation to owners of the land taken over by the project. The government has allocated Rs18 billion for compensation payments and operational expenses for this fiscal year.

More than 8,000 households will be affected by the project, according to the latest report. It states that reservoir for the storage project will submerge 3,560 households, which will have to be resettled in an alternative location with due compensation. As many as 4,557 houses will be partially affected by the project.

Budhi Gandaki Hydropower Project

Baburam Bhattarai government: Forms a development committee to build the project

Pushpa Kamal Dahal government: Signs MoU with the Gezhouba for EPCF model

Sher Bahadur Deuba government: Cancels contract with Gezhouba, decides to build with domestic resources

KP Sharma Oli-led government: Directs Energy Ministry to seal the deal with Gezhouba