China bumps India off $1.6B Nepal power deal

China will develop Nepal's 760MW West Seti Project hydropower plant in a $1.6 billion deal.

The agreement marks China's entry into the Himalayan nation's power and water sector.

 It comes as several other major hydropower projects, mainly developed with Indian investment, have stalled for various reasons, including protests by Maoists against the awarding of deals to foreign companies.

Water-rich Nepal has an estimated 83,000MW of hydropower potential, but actual production is only 1 to 2 percent of that. Power sales to India would potentially add billions to Nepal’s strained budget resources, while helping the energy-short South Asian giant power up factories required to provide jobs for the burgeoning numbers of its young.

Next door, Bhutan has one of the highest per capita incomes in South Asia, partly because of electricity sales to India.

However, with Indian partnerships in Nepal hardly moving, experts say China’s entry into the sector will ensure the efficient and timely completion of projects. China’s interest in the sector also comes as the two Asian powers jostle for influence in the country.

The West Seti Project will be purely for domestic consumption, and “as such we need not go for a power-purchasing agreement with India, Nepal’s only assured market at the moment,” said an official with the Nepal Electricity Authority.

Official projections suggest that by 2019 — the agreed timeline for completion of the West Seti Project — Nepal will have an assured supply of more than 17,000MW against total demand of 2,000MW. “That will save Nepal from looking to India for peak-time purchase,” the official said.

The government authorities have discounted criticism that the decision not to hold open bidding meant China received preferential treatment. “It would have taken time and Nepal would have lost one more opportunity to involve a credible company of international repute,” said Energy Minister Post Bahadur Bogati.

In fact, the West Seti contract was awarded to an Australian company, Snowy Mountain Engineering Corporation, way back in June 1997, but that project never got off the ground because of squabbles over the cost and start date. The government finally terminated that contract last year.