India's GMR to build $1.4-bn hydropower plant in Nepal

Nepal's cabinet on Thursday cleared the way for Indian's GMR to build a $1.4-billion hydroelectric plant in the northwest of the country in the Himalayan republic's biggest foreign investment.

This is GMR's second attempt to enter Nepal. In 2008, it signed an agreement to construct the 900 MW Upper Karnali hydroelectric power plant in the northwest. But the project was delayed as the nascent republic was mired in instability with six government changes in as many years.

Political parties also demanded greater benefits for Nepal from the scheme that is mainly aimed at exporting electricity to power-hungry India.

Nepal's law minister Narahari Acharya said a cabinet meeting had approved the draft of an agreement to be signed with the Indian company. "This approval will open the way for different foreign investment projects that are in the pipeline to move ahead," Acharya said after the cabinet meeting.

"Concerns shown by different parties about the benefits from the project have been addressed as far as possible," he said.

Officials said GMR and another Indian firm, Satluj Vidyut Nigam, plan to construct other hydroelectric plants in Nepal with a potential to generate up to 42,000 MW of electricity.

China's Three Gorges International Corp is also in talks with Investment Board Nepal to build a $1.6-billion dam to generate 750 MW of electricity on the West Seti River in the same area, as Beijing competes with New Delhi for influence in Nepal.

The GMR plant, set for completion in 2021, will provide 12 per cent of its electricity output free to Nepal to ease a crippling power shortage and help its economy emerge from a decade-long civil war that scared away investors and slowed infrastructure projects.

Officials said the Investment Board Nepal will now sign a Project Development Agreement (PDA) with GMR, which will construct transmission lines across the border to transmit the remaining electricity to India.

The agreement was expected to be signed during Indian Prime Minister Narendra Modi's visit in August but was delayed because some political parties wanted to ensure that the supply of water to irrigation canals on the same river would remain unaffected by the dam, as well as other benefits to Nepal.

The Indian firm will give a 27-per cent stake in the plant to Nepal. GMR will build a separate power house to generate two megawatts of electricity to be supplied to villagers in Achham, Surkhet and Dailekh districts where the project will be located, officials said.

A group of former Maoist rebels says benefits to Nepal were not adequate and has vowed to protest against the scheme.