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14 Nov 2017

Nepal scraps contract with Chinese company on 1200-MW hydroelectric project

China has tried hard to get involved in key infrastructure projects in Nepal.

However, Kathmandu threw cold water at Beijing's ambitions by scrapping a $2.5b billion deal for the 1200-MW Budhi-Gandaki hydroelectric project awarded to a Chinese state-owned company.

The decision came after revelations of corruption in the deal.

It also comes as Beijing pressures Nepal to host projects under its Belt-and-Road Initiative (BRI).

In context

Nepal tries to move away from Chinese influence

What does the contract's cancellation mean?

This can be taken as a bold signal from Nepal's Sher Bahadur Deuba-led government to Beijing that it won't be pressured into developing projects under BRI. This further comes even as China tries to re-build its communist support base in Nepal.


What context is this happening in?

Under previous administrations led by KP Sharma Oli and Pushpa Kumar Dahal (Prachanda), Nepal visibly leaned towards Beijing and considered starting key infrastructure projects under the BRI.

The contract for the Budhi-Gandaki project was awarded to Chinese firm Gezhouba Group Corporation in June 2017.

The contract to Gezhouba allegedly bypassed the competitive bidding process required by law to bag the $2.5 billion project.

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Indian projects

Meanwhile, Nepali cabinet extends deadline for Indian firms

In a separate decision, the Nepalese cabinet awarded a 6-month extension to two Indian companies: GMR Energy and Sutlej Jal Vidyut Nigam for financial closure to construct one 900-MW hydroelectric project, each.

The firms have been grappling with several bureaucratic and legal bottlenecks for the projects.

Much of the energy generated by the two hydroelectric projects would be exported to India.

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