The Ministry of Energy, Water Resources and Irrigation (MoEWRI) has recommended the government with the financial designs to construct 1,200 MW Budhi Gandaki Hydropower Project, one of the much-hyped projects that has been moving in slow pace.

A committee under the MoEWRI has come up with three alternatives regarding the investment modalities of the project.

In the first modality, the ministry has recommended the government to maintain the ratio of loans to equity at 80:20. In the first type of funding, the total investment of the reservoir project is estimated to be Rs 306.16 billion, including the interest amount of banks during the construction period. Out of the total amount, the government needs to inject Rs 187 billion, excluding the viability gap fundings. The government is recommended to invest Rs 155.38 billion in subsidized loans while Rs 88.78 billion will be commercial loans.

Of the equity worth Rs 62 billion, 51 percent is to be borne by the government, 20 percent by Nepal Electricity Authority while the remaining nine percent will be from other public entities including the Employees Provident Fund, the Citizens Investment Trust, Nepal Telecom, the Social Security Fund, among others.

As the second alternative measure, the ratio of loans to equity has been maintained at 75:25 out of the estimated investment of Rs 303.77 billion in total. The MoEWRI committee has recommended investing Rs 187 billion, including Rs 148.24 billion in concessional loans and equity of Rs 38.36 billion by the government. The commercial loans will stand at Rs 79.53 billion.

The third financial modality incorporates ratio of loans to equity at 70:30 out of the estimated expenses of Rs 301.22 billion. Of the proposed government contribution of Rs 187 billion, the subsidized loans will be Rs 140.59 billion and equity of Rs 46.51 billion.

According to the MoEWRI officials, the committee has also advised the government to choose the first alternative, citing an assessment of risk, return and investments. The government has projected to spend Rs 73 billion for compensation, restoration and rehabilitation.

Targeting to construct the national pride project, the government established Budhi Gandaki Hydropower Company Limited last year. However, the construction has not been expedited with the authorities concerned delayed in fixing the financing modality.