The Consultant Team of the Centre for Inclusive growth (CIG) met Dr. Subarna Das Shrestha at IPPAN Secretariat on June 2, 2011.

The Centre for Inclusive Growth is a project financed by the UK government's Department for International Development(DFID) in response to a request from the Government of Nepal to accelerate inclusive growth in Nepal by addressing binding constraints to economic growth and economic inclusion. Acting autonomously i.e. outside public sector, it nonetheless collaborates closely with the government.

One of the core projects includes the issue of Electricity (Assured Affordable and Expanding Access to Electricity).

The CIG team was headed by George Davies - Team Leader, who served as Deputy Minister with Energy and Transport for the Government of Ontario, and was a member of the board of directors at Ontario Hydro and Suncor, and Chairman of the Board of the Ontario Energy Corporation, and included , and Sophia Khatun, communication Adviser.

The CIG Team is undertaking initial situation assessment and identification of key issues surrounding Nepal's power sector and therefore is meeting with various stakeholders -- Ministry officials, the NEA, DoED, private developers, and including the DPM, among others. The meeting with IPPAN was organized in this context.

Dr. Shrestha , during  discussion, listed following barriers in the way of hydropower development in Nepal.

•  Inadequate PPA Rates

•  Liquidity crisis and high interest rate

•  Inadequate Fiscal Incentives

•  Project Development Agreement

•  Lack of Cross border and transmission line network

•  Security Issues and local problems.

He said that PPA rates has not been revised since last nine years and hence investors are shying away from investing into the power sector. IPPAN has been lobbying for PPA rate (flat) of 5.99 Rs/unit with provision of price escalation of five percent for nine consecutive years. He also added that the high bank interest rate of 14-16 % and liquidity crisis has made it very difficult to prepare a bankable document of power projects. Though IPPAN has been pressing for VAT exemption, the government is not listening to our demands.

Project Development Agreement prepared by the ministry of energy also needs to be revised so as to make it "more palatable" for foreign  investors. Lack of cross border transmission line and corridor transmission lines have also  been serious  barriers to hydropower development in Nepal.

Awareness of about shares, and spin off benefits like Royalty sharing, shares,  access road, health post , employment for local people,   etc. will  develop  sense of ownership towards the project , will help reduce the friction between the local people and the project.

There should be policy consistency ( at least for ten years) and processing of documents without delay  in the Ministry of Energy, NEA and DoED. There should be ONE Window Policy regarding the processing of documents.

The CIG mission is planning to meet with few developers as well.