Cabinet approves modality for 1,200 MW Budhigandaki Hydropower Project

KATHMANDU: The long-awaited 1,200-megawatt (MW) Budhigandaki multipurpose hydropower project has officially received cabinet approval for its financial and investment modality, paving the way for the national pride project to move forward.

The proposal, presented by the Ministry of Energy, Water Resources, and Irrigation, was finalized after receiving consent from the Ministry of Finance, marking a critical step in reviving the project that had been stalled during former Finance Minister Bishnu Poudel’s tenure.

Current Finance Minister Rameshwar Khanal played a key role in advancing the modality and securing necessary approvals.

Under the approved modality, revenue collected so far from the infrastructure tax on petroleum imports will be allocated to the Budhigandaki project.

Over the next eight years, funds raised through the infrastructure tax, combined with investment from Nepal Electricity Authority (NEA) and public share issuance, will ensure an estimated total investment of NPR 420 billion.

To date, the government has spent around NPR 39 billion on compensation for affected communities, with an additional NPR 80 billion earmarked for the project.

Annual budget allocation of approximately NPR 22 billion over eight years has been planned to facilitate uninterrupted construction progress.

The Budhigandaki project, to be constructed in Dhading and Gorkha districts, is estimated to have a base cost of USD 277 million (around NPR 374 billion).

Including interest during construction, the total project cost is expected to reach NPR 406 billion. The financial structure will comprise 70 percent debt and 30 percent equity.

The implementing company, Budhigandaki Hydropower Company Limited, will be owned 80 percent by the Government of Nepal and 20 percent by NEA.

Government equity contribution is set at NPR 9.747 billion, with concessional loans of NPR 150 billion, totaling NPR 248 billion in government investment. NEA will contribute NPR 24.37 billion as equity.

The cabinet-approved modality also plans to mobilize approximately NPR 90 billion from public share issuance and NPR 35 billion from NEA, in addition to infrastructure tax revenue.

Customs duties and value-added tax (VAT) during construction will be directly invested in the project, while 50 percent of infrastructure tax on petroleum imports will be earmarked for Budhigandaki.

To enhance liquidity, an ‘Energy Bond’ of NPR 30 billion will be issued, open to banks, financial institutions, insurance companies, and government funds. Another NPR 104 billion is expected to be raised through bank loans.

Once operational, the project is projected to generate 141 million units during the dry season and 197 million units in the wet season, totaling an annual electricity production of 338 million units.

Proposed electricity purchase rates are NPR 12.40 per unit during the dry season and NPR 7.10 per unit in the wet season.

Land acquisition for the project is approximately 90 percent complete. A total of 8,117 families in Gorkha and Dhading districts will be affected, including 3,560 families who will be fully displaced.

The construction of a 263-meter-high curved-arch dam will create a reservoir covering around 63 square kilometers.

The government emphasizes that the Budhigandaki project is not only a hydropower initiative but also a strategic project expected to generate multiple benefits, including tourism development, employment opportunities, fisheries, and downstream water management.

The project aims to achieve commercial electricity production within eight years, contributing significantly to Nepal’s energy security and economic growth.