Deal reached with WB on financial management of Arun Hydel

By A Staff Reporter,Kathmandu, Apr. 20: Finance Minister Barsaman Pun and the World Bank senior leadership have agreed in principle on the financial management of the 1,063 MW Upper Arun Semi-reservoir Hydroelectric Project to be built in Sankhuwasabha.

The agreement was reached between Finance Minister Pun, who is now in America, and World Bank senior leadership in Washington DC, according to a press statement issued by Finance Minister Pun’s secretariat. 

Minister Pun and World Bank's Vice President for South Asia Martin Raiser discussed the World Bank-funded projects in Nepal, including Upper Arun.

Joint Secretary and Chief of the International Economic Cooperation Coordination Division of the Ministry of Finance Shree Krishna Nepal, who is accompanying Minister Pun, said that the two sides agreed in principle regarding the World Bank leading the financial management in the Upper Arun. 

After the principal approval of the government of Nepal, the agreement will be formalised and there will be an agreement regarding financial management. 

In the co-financing of the World Bank, there is a preparation to manage the financial management with 30 per cent of equity, besides raising 70 per cent of loan investment from international financial institutions and domestic banks and financial institutions. 

The cost of the construction of the project is yet to be decided. The construction of a 2 km tunnel and 21 km access road has progressed in preparation for Upper Arun. Land acquisition and distribution of compensation are almost over.

The Upper Arun Hydropower Project is a game changer project of Nepal which will be operated at full capacity for 6 hours a day during the six months of winter when there is a high electricity demand. 

Around 4.53 billion units of energy will be produced annually from this project. The generated electricity will be connected to the national transmission system through a new substation to be built at Haitar in Sankhuwasabha through a 6 km 400 kV transmission line. 

The government has included the 635 MW Dudhkoshi hydropower project to be built at Bhunwaghat as a project of national pride. In the meeting, there was a discussion about speeding up the work of other development projects funded by the World Bank. 

There was also a discussion about increasing the facility of the International Development Association (IDA), the World Bank's subsidised lending institution that Nepal has traditionally used and diversifying the projects.

 Minister Pun said that there was a need for foreign investment as internal resources were limited in building the development infrastructure of Nepal. 

He thanked the World Bank for the grant and subsidised loan assistance that the World Bank has been providing for Nepal since the time of malaria eradication and asked for more investment in the future.

Martin Raiser praised Nepal for preparing well for the IDA-21 meeting to be held in Kathmandu in June. He also expressed his happiness that Nepal has advanced itself in the grid concept. 

He said that through the IDA-21 meeting, a big message can be sent from Kathmandu to the world. Representatives of more than 90 member countries are participating in IDA. 

Likewise, Minister Pun thanked the World Bank Group for their high-level representation at the 3rd International Investment Summit to be held in Kathmandu on April 28-29.