Maha Prasad Adhikari, the Governor of the Nepal Rastra Bank (NRB), has emphasized that Nepal’s trade deficit could be effectively addressed if the country could export power worth Rs 130 billion annually. In a meeting with the office-bearers of the Independent Power Producers’ Association, Nepal (IPPAN), Governor Adhikari highlighted the potential of power export as a means to reduce the trade deficit.
Governor Adhikari pledged that the Nepal Rastra Bank is committed to facilitating the development of the hydropower sector in the country. During the meeting, IPPAN President Ganesh Karki proposed a requirement for banks and financial institutions to allocate 20% of their total investments to the energy sector. Governor Adhikari responded by expressing confidence in banks’ ability to invest, even if Nepal were to generate 20,000 megawatts of electricity in the next decade.
IPPAN, however, stated that they require around Rs 555 billion within five years to develop projects for generating approximately 3,700 megawatts of power. In a 10-year timeframe, this requirement increases to about Rs 2,055 billion, assuming power export agreements with India are considered. The figure rises to over Rs 3,750 billion if an additional 25,000 megawatts of electricity, as per the Energy Decade declaration, were to be produced.
IPPAN requested that the NRB’s loan provision, which currently allows projects producing over 200 megawatts to receive loans with just a 1% addition to the base interest rate, be extended to all hydropower projects. They also highlighted banks’ reluctance to invest further in hydropower due to NRB directives, which prevent the distribution of interest income during the construction phase as dividends.
Furthermore, IPPAN called for the continued sharing of bonuses generated during the construction phase and urged the government to facilitate the introduction of new financial instruments like green bonds, climate bonds, or sovereign bonds from international markets. They sought the NRB’s support for refinancing in clean energy due to high interest rates imposed by financial institutions in the energy sector.
In response, the NRB governor acknowledged that matters related to bonds fall under the Finance Ministry’s jurisdiction but expressed the central government’s willingness to facilitate such initiatives. IPPAN also urged the NRB to introduce provisions allowing banks and financial institutions to invest in energy production as capital and requested eased rules and provisions related to investment, bonuses, and withdrawal of investments for international investors to achieve their ambitious goal of generating 25,000 megawatts of electricity and importing 15,000 megawatts in the next decade.
The IPPAN delegation included Vice President Mohan Kumar Dangi and former President Shailendra Guragain, among others, while the NRB meeting included Deputy Governor Bam Bahadur Mishra, executive directors Dr. Gunakar Bhatta, and Dev Kumar Dhakal.