Nepal's government has endorsed plans for Indian company GMR to build the Himalayan nation's largest hydro power plant in a small step toward easing chronic power shortages, officials said Friday.
Govinda Pokhrel of Nepal's national planning commission said a Cabinet meeting endorsed a draft agreement late Thursday to allow the company to build the $1.15 billion power plant with a 900 megawatt capacity.
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GMR executives are expected to fly to Nepal Friday and sign the final agreement with Nepalese officials.
"This agreement would open the door for more foreign investment to enter Nepal to develop hydro power projects," Pokhrel said.
But most of the power generated from the Upper Karnali Hydropower plant would be exported to neighboring India.
Under the agreement, Nepal would get 12 percent of the electricity free of charge and would able to buy more to ease power shortages. Nepal would have a 27 percent stake in the project.
Nepal is facing severe power shortages, with residents enduring power cuts of up to 12 hours a day. The existing hydro power plants are not able to handle demand even during the monsoon season when lake and river levels are high.
The Maoists communist insurgency that lasted for a decade until 2006 which was followed by political instability delayed construction of power plants.
Nepal is mountainous and lined with rivers, making it well suited to hydropower dams.
The Indian company known for building airports, highways and other infrastructure projects, would take five years to build the plant, dam the Karnali river in northwestern Nepal and construct transmission lines. It would operate the plant for 25 years and hand it over to Nepal at the end of the term.