By Anil Giri
Kathmandu, Sep 19 (IANS): The Nepal government and the GMR-ITD Consortium Friday signed a landmark Project Development Agreement (PDA) to develop the 900 MW Upper Karnali hydropower project, aiming to boost bilateral power cooperation wioth India.

GMR-ITD is investing over $1.5 billion for the construction, the biggest foreign investment in Nepal in the energy sector.

Prime Minister Sushil Koirala and visiting Indian Home Minister Rajnath Singh witnessed the signing ceremony held at the Nepal's Prime Minister Office.

The negotiations for developing the project took more than two year bearing fruit only after the visit of Indian Prime Minister Narendra Modi to Nepal in the first week of August.

Only on Thursday evening, Nepal's centre-left cabinet endorsed the PDA paving the way for Nepal and GMR to sign the deal at the earliest.

Chairman of Investment Board Nepal, Radesh Panta and R.V. Sheshan, energy president of GMR, signed the deal.

"This is indeed a historic moment for Nepal and India both," Rajnath Singh after witnessing the deal, adding that India was happy that the deal was signed in Kathmandu.

"It also shows that India wants to share its prosperity with its neighbour."

He also hoped that the developer, GMR, would complete the project within the stipulated date and win confidence.

"It is not a question of credibility of GMR only, it is also associated with India," the Indian minister said.

According to the agreement, Nepal will receive 27 percent free equity and 12 percent free energy from the project. After 25 years of energy production, GMR-ITD will have to hand over the project to Nepal. The Nepal government and GMR had inked the MoU to develop the project in 2008 after receiving the survey licence.

The company will provide free energy round the season to the local residents of the affected areas by constructing another 2 MW project nearby. That will provide employment to 2,000 local people and inject additonal infrastructure in the project site like road, hospital, technical school, bridges and will contribute more services through the corporate social responsibility, said a statement issued by Investment Board, Nepal.

Nepal will receive over Rs.400 billion from the project as royalty and tax.

Expressing satisfaction over the deal, Nepal's Deputy Prime Minister and Minister for Home Affairs Bam Dev Gautam said that following the signing of the PDA, it has unveiled more opportunity to tap the natural resources for the benefit of the Nepalese people.

This agreement will come into effect immediately and be instrumental for the socio-economic development of the country, said Gautam.

Nepal has abundant hydropower resources with fresh Himalayan water with an installed capacity of 84,000 MW and India is one big market for export.

GMR will be generating the power from 2021 and the project cost is $1.5 billion. Officials here claimed, following the deal with GMR, more foreign investment in the energy sector would be poured at a time when Nepal and India also signed another landmark energy pact -- the Power Trade Agreement -- that will open the market to sell energy to India.