Nepal Electricity Authority (NEA) has terminated the contract of Dhalkebar substation as the Chinese contractor had intentionally delayed the works of the project, which is critical for Nepal-India electricity trade.

The Central China Power Grid International Economic and Trade Co Ltd, contractor of the substation, had delayed the works since long putting forward various demands, which are not related with the contract. The contractor had asked NEA to remove the component of Inaruwa and Hetauda substations from the project or provide actual additional cost that accrue while implementing the project.

“The contractor had hardly worked for seven months since the work started one-and-a-half years back,” said Radhesharan Mahato, project manager of Dhalkebar substation.

As per the contract between NEA and China Power Grid International Economic and Trade Co Ltd in June 2014, the substation was supposed to have been completed by September 2015. But the deadline was continuously pushed back as the Chinese contractor had sought additional incentives to complete the project on time.

NEA has already seized the bank guarantee of the contractor. However, the power utility has yet to select the next best option to expedite the project. After termination of the contract, NEA has a few options, like it can call for request for proposal (RfP) from the shortlisted companies, open a rebidding process or hand over a direct contract for remaining works to one of the earlier shortlisted companies.

According to Mahato, 85 per cent works of the project have been completed.

The Dhalkebar substation is a crucial project for cross-border electricity trade with India as the country plans to raise import of electricity via Muzaffarpur-Dhalkebar cross-border electricity transmission line. The country will be able to import an additional 100 megawatts of electricity on top of the existing 145 megawatts from India after the Dhalkebar substation has been charged at 220 kV, which is critical to end load-shedding, according to NEA officials.

Nepal-India energy secretary level talks held in February had also taken into account that the project will be completed by August this year. The Dhalkebar substation is being developed at a total cost of Rs 1.42 billion under loan assistance of the World Bank. Especially for projects funded by the World Bank, the executing agency has to release the payment for equipment to the contractor, after it submits the shipment order of the equipment.

“The contractors normally generate profit from the delivery of equipment despite low bidding for the field level works and they seem reluctant to complete the project works on time,” a high-level official at NEA told The Himalayan Times. “The NEA has also proposed to release 50 per cent of the payment for equipment only after the completion of works to make the contractor liable to complete the project works within the desired time.”