Nepal clears China plan for $1.6 bln hydroelectric dam

KATHMANDU, April 2 Mon Apr 2, 2012 10:51am EDT

KATHMANDU, April 2 (Reuters) - A parliamentary panel cleared the way for a Chinese company to build a $1.6 billion hydroelectric plant in Nepal, the Himalayan republic's biggest foreign investment programme, Nepali officials said on Monday.

Nepal's Maoist-led government signed an agreement with China's Three Gorges International Corp in February allowing the firm to construct the 750-megawatt West Seti dam in the northwest.

The project, set to be completed in 2019, is expected to ease the crippling power shortage in Nepal whose economy is still emerging from a decade-long civil war - conflict that scared away investors and slowed infrastructure projects.

Two weeks ago, the Natural Resources and Means Committee of the parliament, asked for the project work to be halted due to allegations of irregularities in awarding the contract to the Chinese company without any international bidding.

The Chinese firm, which was to own a 75 percent stake in it while the state-owned Nepal Electricity Authority would take the rest, threatened to pull out after the parliamentary panel ordered an inquiry.

"We have now directed the government to let the Chinese company go ahead with the project but with some corrections in the agreement," Shanta Chaudhary, chief of the parliamentary panel, said after an investigation of three weeks.

"But the project must be routed through the Nepal Investment Board as required by law," she said without giving details.

According to Lakshman Ghimire, a member of the committee, the Chinese firm should be given only 51 percent stakes instead of 75 percent and the remaining distributed among the public in the remote villages where the project is to be located.

Officials from the Chinese firm were not available for comment.

Nepal's economy grew 3.5 percent in 2010-11, down from 4.8 percent in the previous year with the country facing 14 hours of daily power cuts during the dry season when its rivers flow slowly.

Aid-dependent Nepal, with 900 megawatt of electricity shortage, is one of the world's 10 poorest countries where tourism and hydropower are two key areas in which the government is trying to attract foreign investment. (Editing by Satarupa Bhattacharjya and Alison Williams)

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