The investment modality (framework) of the 100-megawatt Budhi Gandaki Reservoir Hydropower Project has been approved by the Council of Ministers for the second time. Earlier, the Council of Ministers meeting held on 2 Magh had initially decided to approve the financial investment framework of the Budhi Gandaki Hydropower Project. However, the decision was not validated. Meanwhile, the Council of Ministers meeting held on 12 Falgun has decided to approve the investment framework again.

‘As mentioned in the annual budget and program of the current fiscal year, the financial investment framework of the Budhi Gandaki Reservoir Hydropower Project will be approved,’ the decision of the Council of Ministers has been stated. Point 224 of the budget statement of the current fiscal year states that the Budhi Gandaki Project will be constructed in public-private partnership. 

Energy Minister Anil Kumar Sinha said that the investment modality of the Budhi Gandaki Hydropower Project will now be certified. ‘Now the modality will be certified, it must be,’ he said. Sinha claims that the decision was made again after further discussions as the certification could not be done even though the decision was made earlier. "We had decided to put a figure on how much investment to make during the initial verification, but the verification process was stuck for many days," he said. "Even after the initial decision was made, we have discussed it in detail and have approved the modality of investing 70 percent in debt and 30 percent in equity in principle instead of the figure."

Last December, the Ministry of Finance had agreed to the investment framework for the 1,200-megawatt Budhi Gandaki Reservoir Hydropower Project. Once the Ministry of Finance agreed to the investment framework, further processes were taken forward. In the same vein, the Cabinet meeting held on January 2 decided to approve the financial investment framework for Budhi Gandaki. But the verification could not be done.

The basic cost of the Budhi Gandaki Reservoir Hydropower Project to be built in Dhading and Gorkha is $2.77 billion (about Rs. 374 billion). Budhi Gandaki Company Limited has stated that the project will cost Rs. 406 billion including interest during the construction period. The proposed investment framework has been approved by the Council of Ministers twice, but it has not been certified, said Arun Rajouria, CEO of the project promoter Budhigandaki Company Limited. “It has been approved by the Council of Ministers twice, but it has not been certified,” he said.

The construction period of the project is 8 years. The company has stated that the project will cost Rs 406 billion including interest during the construction period. The modality has been prepared so that the loan and equity (equity) ratio is 70 and 30 percent based on the total cost including interest during the construction period. The government of Nepal will own 80 percent of the shares in the project promoter Budhigandaki Company Limited and the Nepal Electricity Authority will own 20 percent.

After the project is completed or in the final stage of construction, it has been proposed to issue a certain percentage of shares to the general public based on suitability and feasibility, taking into account the actual financial indicators, to reduce the debt burden or restructure the government's share.

The government's project will have an investment of Rs 248 billion, including Rs 97.47 billion for equity and Rs 150 billion for concessional loans. The government has proposed to convert the Rs 45 billion it has invested in the project into shares in the company so far. The government has also proposed to invest the amount for customs and value-added tax during the construction of the project in this project. 

The government had started collecting taxes in the name of Budhi Gandaki. According to Nepal Oil Corporation, taxes were collected in the name of Budhi Gandaki in the fiscal years 2072/73 and 2073/74. After it was heavily criticized, the Ministry of Finance has been collecting taxes in the name of 'Infrastructure Development Tax' by removing the title of Budhi Gandaki. The government had collected Rs 10.59 billion in the name of Budhi Gandaki in 2 years. 

'Infrastructure Development Tax' has been collected since 2074/75. The Corporation has stated that Rs. 11.36 billion was collected in 2074/75, Rs. 12.41 billion in 2075/76, Rs. 13.98 billion in 2076/77, Rs. 22.87 billion in 2077/78, Rs. 24.95 billion in 2078/79, Rs. 20.56 billion in 2079/80, Rs. 20.58 billion in 2080/81, and Rs. 22.10 billion in 2081/82. 

The Corporation used to levy a tax of Rs. 5 per liter on petrol, diesel, and aviation fuel (domestic and international). However, it has increased the tax by Rs. 5 per liter from Magh 2077 and is now levying Rs. 10 per liter. It has been proposed that 50 percent of the infrastructure tax levied at customs points on the import of petroleum products should be allocated for investment in projects. "We were preparing to verify the amount raised for infrastructure tax by determining the number, but problems arise when the consumption of petroleum products decreases/increases, so now the verification will be done by specifying only the percentage," Minister Sinha said.

While reducing the investment so far, the source of the government's investment in the project, Rs 228 billion, will have to be ensured. Nepal Electricity Authority will invest Rs 24.37 billion in 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 by the government, raise investment in the project by issuing shares from the infrastructure tax levied on petroleum products, issue shares to foreign employed and non-resident Nepalis and the general public.

It has been proposed to issue energy bonds of Rs 30 billion, calculated on the mandatory liquidity ratio, with the facilitation of the government, to reduce the financial cost and make the project feasible.

The bonds can be purchased by banks and financial institutions, insurance and reinsurance companies and public funds. A loan of Rs 104 billion will be provided by banks and financial institutions. It is proposed to raise funds 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 is proposed to be Rs 12.40 and Rs 7.10 per unit for the winter season and rainy season 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 under 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. The project will affect 8,117 households in Gorkha and Dhading physically and financially. 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 up. Rajouria says that the goal is to start the construction of the project from January 2028 by moving forward with the construction work of the permanent camp, the access road to the project, etc.

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

After the dam is built, the reservoir of trapped water will spread over 63 square kilometers in the upper coastal area. Due to the 63 square kilometers to be built in Budhi Gandaki, employment, business, tourism hub, fisheries, and downstream benefits can be obtained. The maximum water level of the project will be up to 540 meters.