In a bid to attract investors, Nepra recently offered a lucrative tariff for small hydropower projects but stakeholders believe the whole exercise will be futile without solid sovereign guarantee.

“We are expecting that with the new tariff not only new investors will invest in small hydro projects, but those projects, which had been deferred, will also be initiated again,” a senior official of Nepra said, adding that it would be difficult for any businessman to ignore 20 percent return on equity offer. Nepra last month announced upfront tariff of Rs13.4158 per kilowatt for low head hydropower projects between 01-25 MW capacity on 100 percent foreign financing.

The levelised tariff (for 30 years) is set at Rs.11.10. For 100 percent local financing the tariff is Rs16.1901, with a levelised tariff of Rs13.0297 per kilowatt/unit.

“It is one of the most lucrative tariffs where we are offering 20 percent return on equity,” official said, adding that the new tariff will attract investors towards three projects of more than 10 MW, including Rivali, and Alka power projects. He said hydropower projects are long lasting as some of the present plants have been operational to their full capacity even after 60-70 years in the country.

The authority was repremanded by many on offering such a high incentive for hydro projects where cost of power generation is very nominal as compared to producing electricity through other fuels including diesel, gas and furnace oil. Despite the importance, only one 84MW small hydro project has been completed while two others are in different phases of execution.

The Korean construction company Star Hydro Power Limited, an Independent Power Producer (IPP), is setting up the 150 megawatts Patrind Hydropower Plant worth $400 million with the help of IFC, ADB and K-Exim Bank. Gulpur Hydropower Project, 100MW, at AJK is the second project under construction by another Korean company.

Twenty percent return on equity sound very attractive but with huge budget deficits and panic borrowing from IMF and other international financial institutions, how it can guarantee payment of announced tariff for next 30 years, said Raja Jehangir Mehboob, a consultant, dealing with Canadian investors. He said stable financial policies are a must to attract foreign investors to a country where law and order is worse and the officials create hurdles at every step of project.

The stakeholders suggest that introduction of reward and punishment in bureaucracy will not only help in restoring confidence of foreign investors but crucial projects will also be completed on time.

“There is lack of capacity and non-technical bureaucrats are deciding the fate of these projects, who prefer their own benefits and resultantly, projects gets delayed, their costs go up. But, no civil servant has ever been made accountable, and in some cases these bureaucrats somehow manage to secure key positions after retirement,” said Fasih Ahmed, another alternate energy professional.

The stakeholders suggested that if government is sincere to execute crucial projects, it should start with evaluating that in last ten years, how many megawatt of electricity was actually added to national grid and how many water reservoirs were constructed and all those responsible for failure and delays should be sent to jail.