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The nationally prioritized Budhi Gandaki Hydropower Project has once again been pushed into a cycle of uncertainty, under the pretext of a change in its implementation modality.

Instead of moving forward with the investment structure (modality) that had already been approved by the Cabinet in the past, the government has introduced a new “authority-based model” through the latest budget, placing the project in a new phase of delay and confusion.

Finance Minister Dr. Swarnim Wagle has announced in the budget for the upcoming fiscal year 2083/84 that the 1,200 MW Budhi Gandaki reservoir-based project will be developed under an authority model. In the previous budget, however, the project was slated to be built under a public-private partnership (PPP) model.

The Cabinet had already approved the project’s investment structure and financial framework On February 24, 2023. Based on that decision, a fully government-owned company, the Budhi Gandaki Hydropower Company Limited, was established on September 2, 2022.

Return from approved modality blocked by new decision

Under the previously approved Cabinet modality, the project was planned to proceed with a financing structure of 70 percent debt and 30 percent equity. The revised project cost was estimated at around Rs 406 billion, of which Rs 284 billion was expected to come from debt financing.

Out of this, the government had planned to provide Rs 150 billion as concessional loans, while Rs 104 billion was to be raised as commercial loans from the Employees Provident Fund, banks, and financial institutions. In addition, Rs 30 billion was planned through the issuance of energy bonds.

On the equity side, the government’s direct investment was set at Rs 97.47 billion. The approximately Rs 45 billion already spent by the government on the project was also to be counted as part of equity. The Nepal Electricity Authority was also structured to invest Rs 24.36 billion.

However, with the recent budget shifting the project away from the company model to an authority-based structure, the previously approved financial framework has once again become uncertain.

Repeated modality changes in a single project

Frequent changes in implementation modality have become a defining feature of the Budhi Gandaki project. After the project was taken back from China’s Gezhouba Group in March 2022, every budget has reiterated the commitment to begin construction.

Although the fiscal year 2022/23 budget announced that the project would move forward after finalizing the investment modality, there was no concrete progress beyond the establishment of a company.

Similarly, the fiscal year 2023/24 budget also promised the start of construction, but implementation did not advance.

In fiscal year 2024/25, the project was announced to be developed under a public-private partnership (PPP) model. However, before it could enter the implementation stage, the latest fiscal year budget has again proposed an authority-based model.

Risk of further delays and investment uncertainty

With the new modality proposal, the project appears to be entering another phase of structural redesign. This will likely require additional time for financial structuring, investment commitments, and implementation agreements.

For the upcoming fiscal year, around Rs 150 million has been allocated to the Budhi Gandaki project. However, despite repeated budget allocations over the years, physical construction has still remained limited to early-stage preparations.

Frequent changes in implementation modality within a single project weaken investor confidence and create risks of increased costs and delays.

A strategically important hydropower project like Budhi Gandaki has remained largely confined to budget speech announcements for years. This time as well, the new model appears to have raised more questions than it has resolved.

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