Minister for Energy, Water Resources and Irrigation; Physical Infrastructure and Transport; and Urban Development, Kulman Ghising, has emphasized the need to immediately finalize the investment modality of the 1,200 MW Budhigandaki Reservoir Hydropower Project, a national pride project.

Minister Ghising made this remark during a discussion with Energy Secretary Chiranjivi Chataut and officials from Budhigandaki Company Limited, the project’s promoter. He stressed that the project should not remain stagnant and that a prompt decision on the investment modality must be made. Ghising urged the company’s management to finalize and submit the investment modality based on a financial analysis of the project.

“If we can provide exemptions on expenses made so far for land acquisition, forest land use, compensation for trees to be cut, customs duties, and VAT increases, the project can become financially viable. If half of the infrastructure tax currently imposed on petroleum imports can be directly deposited into the project’s account, there will be no funding issues, and that amount can be used progressively. Funds can also be raised by issuing ordinary shares of the Nepal Electricity Authority to the general public,” Ghising said.

“Prepare and submit the investment modality immediately, ensuring that it is structured with 50% equity and 50% debt, without creating a financial burden on the Government of Nepal,” he added.

According to a consultant’s report prepared in 2015, the project’s estimated cost was USD 2.59 billion. After revision to reflect current prices, the estimated cost has reached USD 2.77 billion (approximately NPR 332 billion). The project’s construction period is estimated at 8 years.

The company has prepared two alternative investment modalities depending on whether the government provides a Viability Gap Funding (VGF) or not.

Option 1 (Without VGF):

If the government does not provide VGF, the equity-to-debt ratio will be 25:75. The expenses incurred by the government on land acquisition and related works will be counted as equity, and additional concessional loans will be required.

Option 2 (With VGF):

If VGF is available, the equity-to-debt ratio will be 30:70. The government will need to provide NPR 73 billion as a highly concessional VGF loan for land acquisition, public infrastructure rehabilitation, environmental conservation, and forest land use.

Equity investment will be collected from the Government of Nepal, Nepal Electricity Authority (NEA), Employees Provident Fund, Citizens Investment Trust, Nepal Telecom, and the general public.

The project’s Detailed Project Report (DPR) and tender documents are in the preparation phase.The most complex part-land acquisition-has achieved about 90% progress. Compensation amounting to NPR 42.65 billion has been distributed to landowners for land, structures, and vegetation losses. The project will physically and economically affect 8,117 households in Gorkha and Dhading districts, of which 3,560 households will be fully displaced.

Due to its proximity to major load centers like Kathmandu, Chitwan, and Pokhara, the Budhigandaki project holds strategic importance for Nepal’s energy security.

A 263-meter-high curved arch dam will be built across the Budhigandaki River, which flows along the border of Gorkha and Dhading districts. The dam will affect 14 former VDCs (now 4 rural municipalities and 1 municipality) in Dhading and 13 former VDCs (now 4 rural municipalities) in Gorkha.

Once completed, the dam will create a 63-square-kilometer reservoir in the upstream area. This reservoir will open opportunities for employment, business, tourism, and fisheries development. The project’s maximum water level will reach 540 meters, and it will produce 3.383 billion units of electricity annually.