Home Business CIAA’s Jurisdiction Questioned After Flurry Of Hydro Licence Cancellations

CIAA’s Jurisdiction Questioned After Flurry Of Hydro Licence Cancellations

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KATHMANDU, 03 NOV 2014  – Lawmakers on Sunday questioned the jurisdiction of the Commission for the Investigation of Abuse of Authority (CIAA) after it issued a series of orders cancelling the survey and generation licences of hydropower projects failing to complete their tasks within the deadline.

In the latest order, the anti-graft body directed the government to terminate the permit of the 37.6 MW Kabeli-A Hydropower Project. The CIAA has already ordered the cancellation of the licences of over one dozen hydropower projects.

Speaking at a meeting of the parliamentary Finance Committee on Sunday, lawmakers asked if the CIAA had overstepped its jurisdiction by ordering the scrapping of the licences of certain hydropower projects.

“Who has given the CIAA the right to terminate the licences of a project and why can’t the government do anything about its unethical behaviour?” lawmaker Surendra Pandey asked. “Who is running the Energy Ministry, the government or the CIAA?”

The former finance minister also accused the anti-graft body of misusing its authority and hindering the country’s development process. About a dozen lawmakers made critical remarks against the CIAA’s actions during the meeting.

The CIAA defended itself by saying that the orders came within its jurisdiction and that they had been given after much thought. “Many developers have been holding on to licences without doing any work. Kabeli did not complete its task as per the agreement, which is why we had to take such a decision,” said Sridhar Sapkota, spokesperson of the CIAA. He added that the CIAA hadn’t penalized the developers itself but had directed the Ministry of Energy, which is responsible for looking after the overall issue, to take action.

Meanwhile, CIAA chief Lok Man Singh Karki also reacted by tweeting on Sunday, “CIAA is not obstructing development but is trying to grease the wheels of development that has been jammed. The prescribed conditions include the Kabeli Hydropower Project. The 37.6 MW project failed to fulfil the PPA (power purchase agreement) and financial closure conditions. We hope appropriate actions will be taken by the concerned ministry without any bias.”

Kabeli-A, which is being initiated under the public private partnership model with the participation of state-owned Hydroelectricity Investment and Development Company Limited (HIDCL), private sector company Butwal Power Company Limited and the World Bank Group, was approved by the Nepal government on October 7, 2009.

The World Bank is financing 40 percent of the project’s cost. Likewise, other international funding agencies and local banks will be providing 40 percent debt finance while promoters will be investing 20 percent as equity.

Its project development agreement (PDA) was signed on January 31, 2010.

In September 2012, the project received a generation license which had a provision that the financial closure and the PPA with state-owned power utility Nepal Electricity Authority (NEA) should be held within a year. Based on the criteria of the agreement, the project had acquired a deadline extension until September 5, 2014. The project had requested for a deadline extension for the second time on July 31, 2014 from the Department of Electricity Development (DoED). After four days on August 4, 2014, the CIAA directed the DoED to submit the file of the project and later directed the Energy Ministry to terminate the generation license stating that the company had failed to complete the financial closure and the PPA within the committed time.

While the CIAA has moved based on unfulfilled promises, the developers of the project, lawmakers and other government agencies along with Finance Minister Ram Sharan Mahat were of the view that such instructions should not have been given when the World Bank had pledged financing for the project after a two-decade gap. In case of financial closure, the Nepal government and the World Bank were to sign a financial investment agreement in July 2014, but it was cancelled due to some reason, according to Butwal Power. The financial closure of the project would be done based on the amount pledged during the agreement.

Finance Secretary Suman Sharma said that the signing of the agreement was in the offing. “We have almost agreed in principle to sign the agreement, and there is a plan to sign it shortly,” Sharma said. In July 2014, International Finance Corporation (IFC) and Kabeli Energy Limited had signed a $3.86 million credit agreement.

Likewise, in case of the PPA agreement with the NEA, the two parties—Kabeli Energy and the NEA—are waiting for a connection agreement. The head of the business division at the NEA, Hitendra Dev Shakya, said that a draft of the agreement was currently at the grid department, and that the agreement would be signed after the department endorses it.

Lawmakers said that since there were many factors that had caused delays to the functioning of the project, such a harsh decision should not be taken without making a proper review of the case. “Hydropower is our lifeblood. There shouldn’t be any kind of obstruction in the development of the energy sector,” said Mahat, adding that delays should not happen whether they are caused by the contractor, the CIAA or even the government.

Mahat said that the CIAA had informally told him that the intention was not to obstruct the project. Lawmaker Bidur Sapkota said that since the CIAA doesn’t have jurisdiction over the issue, the government need not follow it. Lawmaker Jagdish Narsing KC said that the CIAA had been made into a supreme authority and that no one was questioning its directive.

According to Butwal Power, the project has already bought 90 percent of the required land and is on the verge of taking land belonging to the government on lease, the track for a 24-km access road has been completed and is being upgraded soon, the construction of bunkers has been completed and a total of Rs 540 million has been already invested in the project.

“We are very close to executing the project. In fact, we have already given a Letter of Intention to the contractor with the motive of taking the project on the floor by January,”said Padma Jyoti, chairman of Butwal Power.

Likewise, Butwal Power Chief Executive Officer Uttar Kumar Shrestha said that holding the PPA was entirely a technical task and not in the hands of the developers. Meanwhile, Energy Secretary Rajendra Kishore Kshatri said that the ministry had formed a committee to decide the issue. “The CIAA directive is over us. We are working on possibilities to ease the situation,” Kshatri said, adding that even the ministry wasn’t comfortable with the directive.

Source: eKantipur

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