The Nepalese government has cancelled a second agreement with China’s Three Gorges International Corporation for the construction of an HPP, saying it will undertake the project itself.
Three Gorges had already received approval to build a 750-MW. US$1.6 billion HPP on the West Seti River.
The cancellation comes after Kathmandu’s scrapping in November of a US$2.5 billion agreement with China’s Gezhouba Group to build a 1,200-MW HPP at Budhi Gandaki, 80 km from the capital.
Nepali Finance Minister Yubaraj Khatiwada told parliament on May 29 that Nepal would build the West Seti project by itself.
He gave no reason for cancelling the Three Gorges agreement, but Reuters quoted unnamed Kathmandu officials as saying it was because the Chinese company had delayed beginning work, while continuing to press for more generous power tariff terms.
Since Nepal announced plans to improve its electricity supply by tapping into the country’s large hydro potential, estimated at 40,000 MW, both China and India have competed for contracts.
Nepal is experiencing severe electricity shortages and has resorted to buying more power from India.
In May, the Indian state-owned business SJVN started building a 900 MW, US$1 billion HPP in Nepal.
Nepal in 2017 signed up to Beijing’s so-called Belt & Road Initiative to access to Chinese investment in road, railway and electricity infrastructure.
The Loss of key projects in Nepal would be a “major setback” for Beijing as it seeks to expand its influence in the country and South Asia, the South China Morning Post said. “China and India have been vying for influence in the strategically important Himalayan nation,” it said.
China's Gezhouba is already engaged in two other hydro projects in Nepal, while other Chinese companies are building hospitals, roads and airports.
India last year completed construction of two transmission lines into Nepal at the border points of Kushaha-Kataiya and Raxual-Parwanipur.