KATHMANDU: Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari has said the trade deficit situation will end if power worth Rs 130 billion is exported annually.
During the meeting with office-bearers of Independent Power Producers' Association, Nepal (IPPAN), Governor Adhikari mentioned that power export will be the best medium to reduce the trade deficit.
The central bank will provide necessary facilitation in the development of the hydropower sector, Governor Adhikari asserted.
On the occasion, IPPAN President Ganesh Karki urged Governor Adhikari to a make provision requiring banks and financial institutions (BFIs) to invest 20% of their total investment in the energy sector.
In response, NRB Governor Adhikari shared that there is no problem with investment from banks even if 20,000 megawatts (MW) of electricity is produced in 10 years.
However, IPPAN said around Rs 555 billion is needed within five years while developing projects for generating around 3700MW power, around Rs 2,055 billion is needed in 10 years if the power export agreement between Nepal and India is added, and even when more than Rs 3,750 billion is needed if additional 25,000MW electricity is produced as per the declaration of Energy Decade.
Citing that NRB is providing loans to projects with the capacity of producing more than 200MW power by adding only 1% to the base rate, the organisation appealed to the central bank to implement this arrangement in all hydropower projects.
IPPAN further said BFIs have not shown interest in further investing in hydropower projects due to the directives issued by NRB for BFIs. As per the directives, the interest income during the under-construction period could not be distributed as dividends.
The IPPAN also demanded the continuity of sharing of bonuses for the interests generated during the construction phase. It has sought the government’s role in the management of new financial instruments such as green bond or climate bond or sovereign bond from the international market. They also want the central bank to ensure refinance in clean energy, citing high-interest rates for investments by financial institutions in energy.
In response to this, NRB Governor Adhikari said though the matters relating to bond falls under the jurisdictions of the Finance Ministry, the central government is ready to facilitate towards that end.
The IPPAN has also urged the central bank to make provisions allowing BFIs to invest in energy production as capital. They also want rules and provisions related to investment, bonuses, and withdrawal of investments for international investors to be eased to achieve the ambitious goal of generating 25,000MW of electricity and importing 15,000MW in the next decade.
The IPPAN has urged revisions to the NRB unified directives regarding the risk weight of hydropower projects. They proposed reducing the risk weight for operational projects from cent per cent to 50% and to 75% for under-construction projects.
Moreover, the team asked the central bank to develop progressive policy provisions that ensure interest grants, refinancing, interest capitalisation, debt restructuring, and an extended moratorium period for rebuilding hydropower projects damaged by water-induced disasters.
Present at the meeting were NRB Deputy Governor Bam Bahadur Mishra, and executive directors Gunakar Bhatta and Dev Kumar Dhakal.
The IPPAN delegation, led by President Karki, included Vice President Mohan Kumar Dangi and former President Shailendra Guragain, among others.
