Kathmandu, Mar.3 (ANI): The Government of Nepal has signed a Memorandum of Understanding (MoU) with India's state-owned Sutlej Jal Vidyut Nigam (SJVN) and awarded it the 402 MW Arun III hydropower project.

According to the MoU, the SJVN will have to provide 21.9 percent of power (88 MW) to Nepal free of any charge. The SJVN will need to pay 7.5 percent of its total income as royalty to the Nepal Government. The government will also clamp 0.5 percent as export tax, NepalNews reports.

Studies have shown that Arun III can generate 2.9 billion units of power during wet season and 1.55 billion units of power during dry season. The cost of its construction is estimated at 860 million US dollars.

The MoU was signed by joint secretary at the Ministry of Water Resources Anup Kumar Upadhyaya and deputy manager of SJVN Sanjay Upal.

Upadhyaya has said that as per the understanding, Nepal can also buy as much of power generated from the project as it wants. "They can sell the power to India only after meeting our demands," he said.

The MoU awards the project on build-own-operate-transfer basis to SJVN for 30 years. It needs to first fulfill specified conditions to receive survey license following which it can obtain generating license.

The development of Arun III was earlier planned by the World Bank. However, in 1995, it was cancelled under stiff protests by some quarters who claimed it to be highly expensive and environment-unfriendly. (ANI)