American investors of Bhote Kosi Power Company (BKPC) are pulling all kinds of strings in the US senate to make the Nepal government cough up the $1.5 million they claim is owed them by Nepal Electricity Authority. Texas-based Panda Energy International reportedly threatened retaliatory pressure through US senators on duty-free Nepali garment imports. The American operator of the 36MW hydropower plant has also taken the matter of payment up with the Nepali embassy in the US, and the Foreign and Water Resources Ministries in Kathmandu.

NEA says the company is trying to make it pay for what was not included in the Power Purchase Agreement. Under pressure from powerful Bhote Kosi backers, the water resources ministry has lobbed the hot potato at the Department of Electricity Development. Talks were scheduled this week. "We are trying to perform the role of a facilitator, but the two sides have yet to agree to meet halfway," said the department's director general Lekhman Singh Bhandari.

Department officials are worried the row between Panda and NEA will send a negative message to potential investors. A recent study revealed the American investors evaded paying royalty by understating the plant's capacity, which changed from the planned 36MW to the current output of 45MW. In total, the investors themselves owe the government Rs 2.7 million in royalty, pending for the last three years. While the issue of capacity can be amicably settled, the same may not be possible between Panda and NEA. And the situation has only been aggravated by talk of punitive measures on Nepal's garment exports.