March 8: Nepal Rastra Bank (NRB) has amended Refinancing Work Procedure 2077 to provide special refinancing facility to hydropower plants with capacity of less than 10 Megawatts. Prior to this, there was no provision for refinancing to hydropower plants.

Hydro projects below 10MW capacity can now get refinancing facility of Rs 50 million at three percent interest rate. To refinance these hydro projects, banks and financial institutions can seek loan from the central bank. And the central bank will release the funds at 1 percent interest rate to the banks.

The hydropower projects that apply for refinancing facility should have taken loan of at least Rs 200 million. But refinance of Rs 200 million should not exceed 20% of the total refinancing facility provided by the bank.

Energy producers from the private sector have responded positively towards the new provision introduced by the central bank. President of the Independent Power Producers Association of Nepal, Krishna Prasad Acharya, said, it is a praiseworthy decision. This will help to uplift the projects extremely affected by COVID-19. “High interest rate is one of the reasons for poor performance of these projects,” he said, adding, “The new provision of subsidized loans has addressed this problem.”

However, Kumar Pandey, energy entrepreneur, expressed a different view on this topic. He said not only the hydropower projects below 10 MW but all the hydropwoer projects should get this facility. “It is very commendable that the central bank has decided to issue subsidized loans to small hydropower projects but other big projects should also get this facility,” Pandey said.  He also sought for the successful implementation of the newly introduced provision. “The work procedure has made the provision of subsidized loans but BFIs should not shy away from the responsibility on the pretext of legal difficulties when the time to issue these loans approaches,” Pandey said.