Nepal cancels $1.5-billion dam project with China

KATHMANDU: The Nepal government announced on Wednesday it has scrapped an agreement with China Three Georges Corporation for building the $1.5-billion West Seti hydropower project, a blow to Beijing’s ambitious infrastructure plans in the country.

The proposed 750-MW project in western Nepal was considered one of the major Chinese ventures in Nepal, which has signed up for the Belt and Road Initiative. The two sides signed a memorandum of understanding for the project in 2012.

The move came 10 months after Nepal scrapped the award of the 1,200-MW Budhi Gandaki hydropower project to China’s state-owned Gezhouba Group. It also came days after Nepal pulled out of the Bimstec joint military exercise in India.

A meeting of the Investment Board Nepal (IBN), chaired by Prime Minister KP Sharma Oli, decided late on Tuesday to cancel the MoU with the Chinese staterun firm and to work out new modalities for building the dam.

“After Three Georges (Corporation) refuses to develop West Seti project, a task force is formed to recommend an appropriate model to develop the project. A three-member team that consists of the energy minister, finance minister and CEO of the board will recommend an appropriate model to develop the project,” an IBN statement said.

After Oli, who is perceived as pro-China, formed the government, Chinese media reports had suggested Nepal’s Communist administration would go ahead with the West Seti project.

At the end of August, a team from Three Georges Corporation visited Kathmandu and held talks with IBN officials for two days but made no headway.

The Chinese firm had indicated the project was unviable even after Nepal agreed to certain conditions, including revision of the project’s installed capacity and a power purchase agreement in US dollars.

At Tuesday’s meeting, Oli did not consider any of the conditions put up by the Chinese firm and decided to scrap the deal, officials said. IBN had also offered to downsize the project’s capacity from 750 MW to 600 MW.

Officials present at the meeting said the Chinese firm had not shown any intent to take the project forward. Instead, the firm brought up the issues of resettlement and rehabilitation and described them as “expensive and unpredictable”.

MEDIA REPORTS SAID THREE GORGES CORPORATION WANTED TO WITHDRAW AS IT FOUND THE WEST SETI PROJECT UNFEASIBLE BECAUSE OF HIGH RESETTLEMENT AND REHABILITATION COSTS.