The sub-regional initiative of BBIN is very necessary to take the hydropower of Nepal to the next level and for common benefits. India, being the largest economy in the sub-region and SAARC, its role is very crucial in materializing the initiative and SAFTA’s framework. India should be more flexible in terms of participation and in its policy, and play a pro-active and leading role to boost cross-border export of electricity from Nepal.
Sushil Pokharel, executive chairman, Sushmit Energy of Nepal, said this in an email interview with Energy & Power Editor Mollah Amzad Hossain.
Nepal wants to generate 40,000 MW of electricity, mostly hydropower, in next 10 years. What do you say about the high ambition?
If we look at the number of 40,000 MW and 10 years of period, it definitely sounds like a big ambition. But there are also some indicators that show, it is not at all an impossible dream.
The political factor was being a big hindrance in the development of hydropower project. Now, Nepal finally has a political stability. The new government has been elected with a clear majority which is a very good sign.
Economic growth finally back on the right track. The government has already introduced one door policy in order to reduce lengthy bureaucratic hassle and to attract FDI. The government has already allowed Power Purchase Agreement in major foreign currencies if the capacity of the project is above 100 MW.
Nepal authorities invited local and foreign investment to the tune of US$80 billion to implement the plan. How much of the investment you think would be possible internally, mainly the country’s public and private sources?
It is a very good sign that there are many institutional investors who have expressed interest to invest. Personally what I think more important is the participation of investment of local public. For example, Nepali migrant workers could be one segment to look at. By the help of co-operatives and community organizations, many other local people can also participate. Put together in totality, this will be definitely a huge amount but I am not in the position to give you the exact percentage. If we can raise at least US$ 10 billion of the investment from private and public sources, this will encourage potential foreign investors, and local people can also benefit directly. The government has also decided to issue power bond for the locals which will help increase the stake of the locals in the investment.
Do you think the present regulatory regime of Nepal suitable for attracting local private or foreign direct investment?
The government of Nepal is putting lot of effort to bring in FDI. However, some of the past experience has not been very pleasant. I am positive about the current regulator and the newly formed government will consider this as a priority issue for the economic growth of Nepal.
Nepal’s power generation target is cross-border export to South Asian countries, after meeting the local demand. What do you suggest about the possibility of joint venture initiatives among private and public sectors of the SAARC countries, particularly the BBIN countries?
Bangladesh along with other neighboring countries have shown interest in importing electricity from Nepal at various sub-regional BBIN meetings. Four countries have already signed an agreement to facilitate regional trade and business including exporting of the electricity.
I personally think that cross-border export to BBIN countries can take a momentum if we prioritize these countries for the hydropower investment. Bangladesh has been expressing interest to invest in hydropower since last few years and a minister level agreement has already been signed too to build hydroelectric plants.
Do you think it would help materialize the BBIN initiative in the energy sector?
I am optimistic. This sub-regional initiative is very necessary to take the hydropower of Nepal to the next level and for common benefits.
What do you think about India’s policy regime in the case of making the BBIN initiative or SAFTA framework successful?
India, being the largest economy in BBIN and SAARC, its role is very crucial in materializing the initiative and SAFTA’s framework. India should be more flexible in terms of participation and in its policy, and play a pro-active and leading role to boost cross-border export of electricity from Nepal.
It was claimed at the recent summit that Nepal’s power sector offers one of the highest returns on investment (ROI) in Asia — more than 25 percent return on investment over the holding period and four times the value of the investment on exit. Do you think it’s enough to attract the huge amount of investment?
I think it is definitely one of the attractive features. However, it is not enough to attract investors with this one feature only. Along with the ROI, investors also look for security of their investment. It is very unfortunate that Nepal does not have a sovereign credit rating.
How do you foresee the political situation in Nepal, after the recent election?
As I mentioned before, political instability was the biggest challenge. I have positive feeling that with the recently conducted local election and parliamentary elections, the politics is going to be back on track. The left-coalition seems to be heading towards party unification. This suggests that there will be a strong government for next five years at the least.
There are allegations that the Nepali government agencies have been slow to implement the policies regarding hydropower development. What do you say?
It is partly true and again it was because of the volatile political situation. There was constant change in the government meaning ministers were changed in less than a year of period. This made it challenging for people in the ministry to implement the policies. Lack of one window policy was also another challenge as the investors had to go from door to door for each and every clearances and licenses. As I mentioned before, the government has introduced one door policy for FDI and this policy seems to be functioning well now.
Land acquisition and clearance of forest and environment considered as some of the factors distracting FDI in Nepal’s energy sector. Do you think so?
That is partly true. Being a developer and a member at EDC what I think is we cannot ignore environmental issues. Energy ministry along with Forestry and Environment Ministry should develop a mechanism where hydropower projects can be developed with as much as less impact to the environment. If some trees should be cut for the land acquisition of the project, as developer we need to make sure we compensate that in some ways. That may be plantation and other similar activities. The major focus should be on eco-friendly measures, that way it will be a win-win situation. The close coordination between the concerned ministries is very important to meet our mega ambition.
The government has recently formed a national natural resources and fiscal commission (NNRFC). It is a constitutional body which will devise a formula for the distribution of grants, revenues and royalties to sub-national governments. I am confident that NNRFC will also help address this issue.
From Energy & Power Magazine