Nepal and China signed an agreement to develop a 1,200 megawatt hydropower project, the country’s largest to be built in central Nepal.
Nepal’s caretaker government, headed by the Maoist premier, last week decided to award $2.42 billion Budhi Gandhaki Hydropower Project to China’s Gezhouba Group Corporation (CGGC).
The decision sparks criticism that the deal was struck without bidding.
Energy Minister Janardan Sharma signed the agreement with Lv Zexiang, president of CGGC Beijing, in Kathmandu on Sunday.
Nepal, which has a vast network of rivers originating in the Himalayas, has a 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 the demand.
The Chinese company would build the plant under engineering, procurement, construction and financing model, said Dinesh Kumar Ghimire, spokesman of Nepal’s Ministry of Energy.
“The company will review the DPR (Detailed Project Report) within a year. Then, the government will sign another agreement if its financial modality is acceptable,” Ghimire told Anadolu Agency.
The project is second major hydro investment after China secured a deal early this year to develop a 750 MW project in western Nepal.
Hydropower is one of several areas where Nepal’s giant neighbors -- China and India -- compete for influence in the impoverished country.
India has invested in two mega hydro projects with each expected to generate 900 MW of electricity in Nepal.
Many see the new agreement as a balancing act of Prime Minister Pushpa Kamal Dahal, who led a 10-year Maoist insurgency before signing peace deal in 2006.
Dahal resigned from his office last week, paving the way for Sher Bahadur Deuba, the chief of the largest Nepali Congress party seen as closer to India, to head the new coalition government.
The government has allocated nearly $100 million for the compensation to thousands of people who face displacement from the project in Gorkha and Dhading districts of the central region.
By Deepak Adhikari in Kathmandu, Nepal