POST REPORT KATHMANDU, March 2 - The government on Sunday signed a Memorandum of Understanding (MoU) with India-based Sutlej Jal Vidyut Nigam for construction of 402 MW Arun-III Hydropower Project.

Joint Secretary at the Ministry of Water Resources, Anup Kumar Upadhyaya and Nigam's Deputy General Manager Sanjay Uppal signed the MoU. AS per the understanding, Sutlej will complete construction of the project within five years (60 months) after it arranges necessary fund for implementation of the project.

It will provide 21.9 percent of free electricity to the Nepal government every month when it starts generating power from the project in addition to royalty and export tax of the electricity.

The Indian company will also reimburse Rs 451.4 million to Nepal government as the amount spent by the government for feasibility study of the project, the release stated.

The Indian power-generating company will be responsible for constructing access road and transmission line as well as conducting Environment Impact Assessment of the project site. It will have to submit Rs 100,000 per unit before applying for survey license and submit another Rs 500,000 per unit as bank guarantee for power-generation license.

Nigam will construct the project under Build Own Operate and Transfer policy (BOOT for 30 years. The government had chosen the Indian developer as it agreed to all the conditions set by the government including free energy from the project. A government team formed by the cabinet in December last year negotiated the Arun III project with the Nigam in accordance with the cabinet decision to negotiate for 21.9 percent free energy.

The taskforce headed by former finance secretary Bhanu Prasad Acharya had ranked the Nigam last year as second best after GMR.

Source: The Kathmandu Post, 3 March 2008.