Monday, December 13, 2010

Re: FW: "Fall back" PPA

December 13, 2010
Tore Skeie
Kathmandu University

Dear Tore jee

Thanks a lot for asking these questions affording me an opportunity to further shed light on it.

• There will not be anything for GoN as all taxes are exempt during most of the operation period (like no corporate tax on the profit earned by the project company, no income tax on the interest earned by the lenders on the debt provided by the them to the project).

• Out of Rs 3 only about 2% will be spent in Nepal in low level employees/workers. Rest will stay out of Nepal.

• During the construction period too, under the policy adopted by GoN currently, it gets no taxes paid as custom duties and VAT on the imports is exempt.

• GoN has adopted above policy in the name of encouraging hydropower development.

• On the other hand Indian government will be earning INR 2/kWh (Rs 3.20) as import duty on the power imported from Nepal.

• There definitely would be wheeling charge levied for using the Dhalkebar T/L. However, as you know full well, a T/L will not be even able t break even until it is being used at full capacity which doesn’t happen usually.
With best regards,


Ratna Sansar Shrestha, FCA
Senior Water Resource Analyst

From: Tore Skeie []
Sent: Friday, December 10, 2010 9:56
To: Ratna Sansar Shrestha
Subject: {Disarmed} Re: FW: "Fall back" PPA

Dear Ratna ji,

You have highlighted many interesting facts here, most of them related to the political arena, but also raising the question: what should we do to rectify the situation? Is the export to India to be done at 3 rs/kWh with no gain for the Nepalese government (taxes etc)? Is the 3 rs/kWh the full picture or what else is there in the package? Will there be no taxes levied at the use of the Dhalkebar TL for private power exporters?


Tore S

2010/12/9 Ratna Sansar Shrestha

NEA has signed “fall back” PPAs for Balephi project, 50 MW and Upper Marsyangdi II, 600 MW in Kartik 2067. Kantipur reported about the signing of PPA with former on 19th Marga and it was reported that the tariff is Rs 4.27 per unit. But the media is yet to report about the signing of fall back PPA for the latter.

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