Prime Minister Pushpa Kamal Dahal has directed government authorities to take forward the development of the Budhi Gandaki Hydropower Project. The Prime Minister in a discussion on Thursday instructed Chief Secretary Shankar Das Bairagi to move ahead with all necessary works to start the development of the Budhi Gandaki Hydropower Project. The members of parliament representing different constituencies in Gorkha and Dhading were also present in the discussion. Dahal himself has also been elected as a member of parliament from Gorkha-2. The development of the much-talked-about project has failed to take off despite the government deciding to develop it on its own resources. The newly established Budhi Gandaki Jalbidhyut Public Limited has failed to come into operation with the finance ministry not providing the required Rs 10 million to the company.

The company established in early September last year to develop the 1200MW Budhi Gandaki Hydropower Project is awaiting a budget release by the ministry so that it would get a permit from the Office of Company Registrar to commence operations.

According to a board member of the company, the finance ministry denied releasing the fund ahead of the election, citing the code of conduct implemented by the Election Commission. “It is not clear when the fund will be disbursed as the new government has just been formed,” the company's director said. Budhi Gandaki is a ready-to-go project as its detailed project report (DPR) has already been prepared and the compensation distribution to the residents of the project-affected areas for the acquired land is also about to complete. The project will be Nepal's largest reservoir-type hydropower project and the total cost of its development has been initially estimated at USD 2.6 billion. The project, which will be built on the Budhi Gandaki River, is located at the boundary between the Gorkha and Dhading districts. However, ensuring adequate resources and closing the project's budget gap will be a difficult undertaking for the government. “As a ready-to-go project following the completion of DPR and almost completed compensation distribution process, the next challenge is to ensure sufficient funds to develop this project,” the board member said. “Once the company comes into operation, our focus will be to complete the financial closure.” A committee headed by the then National Planning Commission Vice-chairperson Swarnim Wagle has recommended the government in 2017 to develop this project with domestic resources. The committee suggested providing viability gap funding that will cover around one-third of the project development cost. As per the report, the government could cover the cost of land acquisition and resettlement of displaced families which could total as high as Rs 94 billion. According to the report, a significant chunk of resources can be generated from government institutions. An infrastructure tax being imposed on imported fuel could be an important source of revenue that can be used to develop the project. “Based on an average increase in petroleum consumption by 10 percent a year, as much as Rs164 billion can be collected from taxes imposed on fuel alone by the fiscal year 2026-27," reads the report. This estimated tax collection was calculated based on Rs 5 per liter infrastructure/carbon tax on sales of petroleum products (except cooking gas) that the government had imposed in 2015 to manage the financial resources for developing the Budhi Gandaki project. From the fiscal year 2018/19, the government started charging taxes under the name of ‘infrastructure development tax.’ The tax was also raised to Rs 10 per liter of petroleum products. According to the report, the extra fund can also be generated from government-owned entities like Nepal Electricity Authority, Employees Provident Fund, Nepal Telecom, Rastriya Beema Sansthan, Hydroelectric Investment and Development Company, Upper Tamakoshi Hydropower Company, Chilime Hydropower Company, Nepal Army, Nepal Police, and the general public could be tapped for the project. The report also stated the resources could also be generated from international donor agencies or by the issuance of project-specific bonds and credits from the project’s suppliers. However, the company’s director said that the government has not yet discussed with the donor agencies about potential funding from them. “This is the option that can be explored once the company comes into operation,” the director said. Massive sums of money have already been spent by the government to compensate the residents of the project-affected areas for the acquisition of their lands. According to the project's Environment, Compensation Distribution, Resettlement, and Rehabilitation Unit, Rs 41 billion has already been spent towards that end. It has been estimated that 58,000 ropanis of land will be needed to develop this project. For the project, hardly any difficulty in land acquisition has been experienced. There is also a broader political consensus for the development of this project with major political parties agreeing on Budhi Gandaki as an important hydropower project to ensure the energy security of the country for the coming decades. In 2017, the Pushpa Kamal Dahal-led government awarded a contract to build the project without competitive bidding to China Gezhouba Group Corporation under the engineering, procurement, construction, and financing (EPCF) modality. This was overturned by the Sher Bahadur Deuba-led government in November 2017. However, in September 2018, the then KP Sharma Oli administration decided in favor of the Chinese company, reversing the decision of the Deuba-led government. In April last year, the Deuba administration again terminated the license granted to the Chinese company as the contractor was not making any progress to move ahead with the development of the project. The government anticipates finishing the project eight years after the commencement of construction works.