KATHMANDU, APR 04 -
Management of Hydroelectricity Investment and Development Company (HIDC) has bogged down in confusion as the government has not decided which of its agencies should oversee it—the Ministry of Energy or Nepal Rastra Bank (NRB).
The government established HIDC to fund large hydel projects and accelerate hydropower development in the country as lack of financial resources has been one of the major stumbling blocks. Though the HIDC has planned to get the go-ahead for its banking activity, its regulatory body has not been determined.
Currently, a team headed by NRB deputy governor Maha Prasad Adhikari has been reviewing a report on HIDC’s investment and recovery policy submitted by a technical team. Adhikari’s group is expected to give the final shape to the policy for the central bank’s approval.
An HIDC board member said that as the central bank has approved setting up the company in principle, it will also okay starting transactions and regulate the company. “As the company won’t be collecting deposits from the public, the central bank may regulate its activities,” said the board member.
However, another official said that the Energy Ministry could handle the company instead of banks and financial institutions registered under the Bank and Financial Institution Act (BAFIA). NRB spokesperson Bhaskarmani Gnawali said that the central bank’s regulating the company will depend on how it functions as an institution.
The NRB legal department had advised against the central bank regulating HIDC. “As NRB’s regulatory job is to protect the interest of depositors, it is not necessary for it to regulate a company that does not collect public deposits,” said Dharmaraj Sapkota, chief of NRB’s legal department.
The biggest concern for HIDC officials is the company’s role in loan recovery after it lends to hydropower projects and the measures to be taken in the case of loan defaults. “That’s the reason why it is taking so long to finalise the recovery guidelines,” said an official involved in reviewing the guidelines.
A member of Adhikari’s team said that they would complete reviewing and preparing the final document within the next two months and submit it to the central bank for approval to start operations. HIDC has deposited most of the funds collected from its promoters with the aim of earning interest while the company prepares to go into business.
Meanwhile, the Employees Provident Fund (EPF) and the Citizens Investment Trust (CIT) have been providing loans to hydropower projects although they have not been practically regulated by the central bank. Last year, the government had asked the central bank to regulate these institutions too, but NRB is yet to do so formally. However, their own independent acts guide them with regard to recovering their lending.
“We are not sure whether a separate act is necessary to ensure recovery of loans,” said an HIDC board member. HIDC officials fear whether the guidelines alone would be enough to stop possible defaults.
For example, the EPF Act 1962 has empowered it to recover loans by foreclosing on property put up as collateral or wealth guarantee if any industry, enterprise, corporate body or employee fails to pay the advance, loan and interest. Similarly, the CIT Act 1991 has given it the power to recover loans.
Posted on: 2012-04-04 09:42