Nepal on Monday scrapped the contract of a 1,200-megawatt hydropower project, the country's largest, that it had awarded to a Chinese company in June this year.
A meeting of the council of ministers on Monday scrapped the $2.42 billion Budhi Gandaki Hydropower Project with China's Gezhouba Group Corporation (CGGC) upon instructions from a parliamentary committee, said Kamal Thapa, deputy prime minister and minister of energy.
“According to the instructions from several parliamentary committees, the cabinet meeting today scrapped the contract agreement with CGGC. There was in awarding the contract, which was done without following due procedure,” Thapa tweeted on Monday.
The previous government had declared it a ‘national pride project’, but it was mired in controversy after media reported that the World Bank had blacklisted the Chinese company.
Struck by the coalition government led by Maoist Prime Minister Pushpa Kamal Dahal, it drew sharp criticism from opposition lawmakers who said it was done without proper bidding.
In September, the Parliament's Public Accounts Committee instructed the government to furnish details of the project amid accusations that the government had received a huge kickback for hastily signing the contract with the Chinese company.
The government has already handed out compensation to thousands of people affected by the proposed strategically important plant, which envisages a 263-meter-high dam and a 48-kilometer embankment in Gorkha and Dhading districts of the central region.
The mega power plant was expected to meet the country’s energy needs.
Nepal's neighbors China and India have competed to develop Nepal's hydropower resources, which had remained untapped due to years of political instability and war.
While Dahal, the current prime minister is seen as close to China, his predecessor, Sher Bahadur Deuba is believed to be closer to India.
India has invested in two mega hydro projects with each expected to generate 900 MW of hydroelectricity in Nepal. China, for its part, has agreed to invest in a 750 MW hydro project in the west of the country.
Nepal, which has a vast network of rivers originating in the Himalayas, has the potential to generate at least 43,000 MW of hydropower, but years of political instability and lack of investment has led to a meager output of 900 MW, well below demand.
By Deepak Adhikari in Nepal