• The 900-MW project is expected to commission power five years after financial closure

Kathmandu, February 22

The government of India has paved the way for the state-owned Satluj Jal Vidyut Nigam Ltd to develop Arun III hydroelectric project in eastern Nepal.  The cabinet committee on economic affairs chaired by Prime Minister Narendra Modi has approved investment for generation component of the 900-megawatt Arun III hydroelectric project, which is worth INR 57.24 billion at May 2015 price level, according to the Press Information Bureau of the Indian government.

Following the decision of the Indian government, SJVNL will be able to achieve financial closure by the September deadline. The Investment Board Nepal and SJVNL had signed Project Development Agreement to develop Arun III hydroelectric project located in Sankhuwasabha district on November 25, 2014. The PDA had provided two years for financial closure which the prime minister-led IBN extended by an additional 10-month period, as the developer sought one-year extension to achieve financial closure.

The developer has already cleared most of the land compensation to the affected people in the project area. According to IBN, the developer has cleared 94 per cent land compensation of locals and construction of 28-km access road to the project has been expedited.

The project is expected to commission power five years after financial closure.

SJVNL has established SJVN Arun-III Power Development Company Ltd, which is registered in Nepal as a cent per cent subsidiary of SJVNL, to implement the project.

Arun-III is a peaking run-of-the-river project that will have about 70-metre high concrete gravity dam and head race tunnel of 11.74 km with underground power house containing four generating units of 225 MW each on the left bank.

SJVNL bagged the project through international competitive bidding. In March 2008,   a memorandum of understanding was signed between the government of Nepal and SJVNL to execute the project on build, own, operate and transfer model for 25 years, excluding the construction period. According to the PDA document, Nepal government will benefit through 21.9 per cent free energy from the project. In addition, the government will receive Rs 150 billion as royalty and Rs 77 billion as income tax, besides the electrification benefit to the affected community in the project area.

The project will provide surplus power to India strengthening power availability in the country and will also strengthen economic ties with Nepal. Power from the project will be exported from Dhalkebar in Nepal to Muzaffarpur in India.