“A condition of the MoU says that the capacity of the project will be updated,” said the official of VUCL. “Currently, the project has been designed by taking into consideration the domestic market. With the involvement of an Indian company, it wants to optimize the capacity in line with the market needs of India.”
The capacity of the 900MW Arun 3 project was also increased from 300MW. According to the VUCL official, there has not been a concrete agreement on whether all the power produced by the company will be exported or parts of the energy will be sold within Nepal. The official said the joint venture company producing as much power as possible would be in the interest of the company if all the power could be sold. The project will use the flow from the Karnali River for power generation and the generated power will be fed into the integrated power system of Nepal. This project is conceived as a Peaking Run-of-River (PRoR) type scheme. It is the second state-owned Indian company to venture into Nepal’s hydropower project after SJVN Limited, which is developing three power projects in Nepal’s eastern Arun river—Arun-3, Lower Arun, and Arun-4 hydropower project. NHPC Limited has also bagged the 740MW West Seti and 450MW Seti River-6 project. The Investment Board Nepal bundled these two projects in a single package to make them attractive to investors. Four years after China’s Three Gorges Corporation pulled out from the West Seti Project in 2018, an Indian company has moved ahead to develop this project. Now, one state-owned Indian company will be developing a number of projects in the eastern region of Nepal while another state-owned Indian company will be developing several projects in the western side of Nepal. NHPC jumped into investment in Nepal after Nepal and India issued a joint vision statement on power sector cooperation in April last year. With India not willing to buy electricity generated from the project employing Chinese investors or contractors, Nepal has been forced to seek Indian investors if it wants to export surplus power to its southern neighbor, which has so far been the only external buyer of the electricity. Currently, India’s state-owned entities are increasingly involved in hydropower development in Nepal, there is a scope for attracting the private sector too, according to private sector representatives. An office bearer of the Independent Power Producers' Association (IPPAN) said that the private sector of India has also been closely watching how the state-owned companies will develop the project in Nepal. “The state-owned companies are offering a certain portion of electricity that will be generated from the Phukot Karnali project to Nepal free of cost. But I doubt if the private sector will be able to do so because they have to raise financial resources from the market,” the IPPAN official said.
