Policy Disparity: Ministry of Energy proposes customs duty exemption for flood-damaged hydropower projects, Ministry of Finance declines

KATHMANDU: In a significant policy shift, the Ministry of Finance has announced the withdrawal of customs duty exemptions for goods intended for the repair of flood-damaged hydropower projects. Revenue Secretary Dr. Ram Prasad Ghimire confirmed that the provision for discounts on maintenance of hydropower projects has been omitted from the Financial Act.

Dr. Ghimire clarified, “It was previously assumed that there was an oversight in the Financial Act. However, upon detailed examination, it was deliberately removed. The government has been extending a discount of 2 trillion rupees for all inland revenue and customs. Unfortunately, we can no longer provide this discount as it has been removed from the Financial Act.”

He further explained that completed hydropower projects were also removed from the Economic Act, indicating that concessions cannot be granted indefinitely.

The decision comes after Energy Secretary Gopal Prasad Sigdel raised concerns about the absence of customs duty exemption provisions for flood-damaged hydropower projects in the Financnial Act. Despite recommendations from the Ministry of Energy, the Revenue Secretary asserted his inability to grant exemptions, citing legal constraints.

In response, Secretary Sigdel stated that the issue of revenue discounts does not fall under the purview of the Ministry of Energy and has forwarded recommendations to the Ministry of Finance. However, Dr. Ghimire emphasized that exemptions cannot be provided under existing laws.

The Finance Committee under the Federal Parliament recently deliberated on the challenges faced by 31 hydropower projects in eastern Nepal, which incurred damage during the June 1 flood. Promoters of these projects expressed grievances over delays in customs clearance for goods meant for repairs, despite assurances from the Ministry of Energy.

Ganesh Karki, President of the Independent Power Producers Association, Nepal (IPPAN), lamented the bureaucratic hurdles faced by energy promoters, highlighting the significant financial losses incurred due to delays in customs clearance.

“The Ministry of Energy has announced its intention to grant Customs Duty Exemption for equipment related to flood-damaged hydropower projects. However, the Ministry of Finance has stated that it will not provide such exemptions. This disparity in government stance raises questions about policy consistency,” said Karki.

Rajesh Shrestha, Chairman of Panchthar Power Company, underscored the urgency of customs clearance for electromechanical goods essential for repairing the heavily damaged 15 MW Hewa Khola project. He expressed frustration over the delays, emphasizing the need for immediate action to mitigate further losses.

Nepal Rastra Bank Governor Mahaprasad Adhikari assured priority treatment for flood-damaged hydropower projects, pledging support for debt restructuring and rescheduling to alleviate financial strain on promoters.

Energy Minister Shakti Bahadur Basnet reaffirmed the government’s commitment to facilitating the private sector’s role in energy production, signaling a collaborative approach to address the challenges faced by hydropower projects affected by natural disasters.