The project, which has been languishing in the modality for years, has found a way out with the government approving the investment modality (framework) for the Budhi Gandaki Reservoir Hydropower Project. The Cabinet meeting held on 2 Magh approved the investment framework for the Budhi Gandaki Reservoir Hydropower Project.

Announcing the decision of the Cabinet meeting on 4th Magh, outgoing Minister for Communications Jagdish Kharel said that it has been decided to approve the financial framework of the Budhi Gandaki Reservoir Hydropower Project. 

Earlier, the National Planning Commission and the Ministry of Finance had agreed on the investment modality of the 1200 MW Budhi Gandaki. Last time, outgoing Minister for Energy, Water Resources and Irrigation Kulman Ghising had sent the Ministry of Finance for agreement on the investment modality. The project could not start construction due to repeated investment modality formation but lack of approval. Due to this, despite being a priority of the government since the budget statement of the fiscal year 2068/69, the project could not gain momentum. 

The progress of Budhi Gandaki, which has been included as a national pride project, has been seen only in the land acquisition and compensation distribution for 13 years. Although the land acquisition and compensation distribution work has been 95 percent completed, the project could not start construction as the government did not finalize the investment modality. 

The basic cost of the Budhigandaki Hydropower Project to be built in Dhading and Gorkha is $2.77 billion (about Rs. 374 billion), while the project, including interest during the construction period, will cost Rs. 406 billion, according to Budhigandaki Company Limited. 

The company's Chief Executive Officer, Arun Rajouria, said that the construction of the Budhigandaki Hydropower Project will begin as soon as the Council of Ministers approves the investment framework. The construction period of the project is 8 years. The company says that the project will cost Rs. 406 billion, including interest during the construction period.

The modality has been prepared so that the debt and equity (equity) ratio is 70 and 30 percent, based on the total cost, including interest during the construction period. The project promoter, Budhigandaki Company Limited, will own 80 percent of the shares of the Government of Nepal and 20 percent of the shares of the Nepal Electricity Authority.

After the project is completed or in the final stage of construction, it has been proposed to reduce the debt burden by issuing a certain percentage of shares to the general public based on suitability and feasibility, taking into account the actual financial indicators, or to restructure the government's share. The government will invest a total of Rs 248 billion in the project, including Rs 97.47 billion for equity and Rs 150 billion for concessional loans. It has been proposed to convert the Rs 45 billion invested in the project so far by the government into share investment in the company.

It is proposed that the government should also invest the amount for customs and value-added tax in this project during the construction of the project. It has been proposed that 50 percent of the infrastructure tax levied at the customs point on the import of petroleum products should be allocated for investment in the project.

By reducing the investment so far, the source of the government's investment in the project of Rs 228 billion should be ensured. The Authority will invest Rs 24.37 billion for equity in the project. It has been proposed to issue shares of Nepal Electricity Authority, issue energy bonds, take loans from banks and financial institutions, provide concessional loans to the government, raise funds from the infrastructure tax levied on petroleum products, issue shares to foreign employed and non-resident Nepalis and the general public to raise investment in the project. It has been proposed to issue energy bonds worth Rs 30 billion, calculated on the mandatory liquidity ratio, with the government's facilitation to reduce financial costs and make the project feasible. 

The bonds will be purchased by banks and financial institutions, insurance and reinsurance companies and public funds. A loan of Rs 104 billion will be disbursed from banks and financial institutions. It has been proposed to raise it through co-financing of Employees Provident Fund, Citizens Investment Fund, Social Security Fund, Insurance and Reinsurance Company, HIDCL, Nepal Telecom and commercial banks.

The project will generate 3.38 billion units of electricity, including Rs 1.41 billion in the winter season and Rs 1.97 billion in the rainy season. The electricity purchase and sale rate has been proposed to be Rs 12.40 and Rs 7.10 per unit for the winter and rainy seasons respectively. Thus, after the project starts generating electricity, it will generate an annual income of Rs 31.48 billion.

The project's power generation license is proposed to be for 50 years. If the project is completed within 8 years, electricity will be generated for 42 years. The detailed project report and tender documents of the project are in preparation. The progress of land acquisition, which is considered the most complex part of the project, is about 90 percent.

Rs 42.65 billion has been distributed to the landowners as compensation for land, structures, plants and fruits. 8,117 households in Gorkha and Dhading will be physically and financially affected by the project. Out of these, 3,560 households will be completely displaced.

‘There is no situation where the project cannot be constructed due to land acquisition and compensation distribution,’ said Rajouria, ‘All the documents are ready to tender for the construction of the project.’ Rajouria said that once the Council of Ministers approves the investment modality, the financial management will be taken forward. Rajouria says that the goal is to proceed with the construction of the project from January 2028 by moving forward with the construction work of the permanent camp, access road, etc. for the project.

Budhi Gandaki is also of strategic importance from the perspective of energy security due to its proximity to electricity load centers like Kathmandu, Chitwan, and Pokhara. A 263-meter-high arch dam with a curvature will be built to block the Budhi Gandaki River, which flows through the border of Gorkha and Dhading. This will affect the 14 former VDCs of Dhading (currently 4 rural municipalities and 1 municipality) and 13 VDCs of Gorkha (currently 4 rural municipalities).