A new controversy has clouded the Arun-III hydroelectricity project, with the government blaming EurOrient for not paying Rs 40.2 million as guarantee of performance, and the American company asking for more time to get paperwork done. EurOrient officials are visiting Nepal to resolve the "misunderstanding", and a company source told us, "We're still very much interested in the project".

The controversy erupted after the Electricity Development Centre (EDC) wrote to the American company on November 7 asking it to submit Rs 40.2 million as performance assurance, "within 15 days", warning that only such a submission would entitle it a survey licence for the 402 MW project. The company's position is that its insurance agents would need 60-90 days to underwrite the performance assurance bond, something that has already been commissioned. It has already paid Rs 60,000 to the EDC as survey licence fees, but had at one point requested the EDC to allow it to pay the remaining money when it applied for a survey licence. The government requires companies to submit bank guarantees for the money, a way to prevent licensees from squatting on licences.