Legislators on Monday evaluated and approved the basis for a draft law that will see through a US$ 20 million loan for a hydro-power project on River Nyabarongo.

"We have an energy problem and it is in that regard that Rwanda approached India for the loan. They accepted our request and the loan will come in three phases," James Musoni, the Minister of Finance said while appealing for the lawmakers’ approval.

India’s Lines of Credit (LOCs) to developing countries are routed through Exim Bank of India which extended the loan to Rwanda. The agreement to this effect was signed between the two governments on October 9 last year in New Delhi and accordingly, the US$ 20 million is the first tranche of a staggering US$ 80 million LOC approved by the government of India to Rwanda.

"Our calculations show that the Nyabarongo project will add more to our system and this in addition to other projects will help satisfy our energy needs," said Musoni.

He explained that the total cost of the project amounts to US$ 97.7 million and government will contribute the rest of the money required.

As the minister explained, the loan will be repaid in a period of 20 years at an interest rate of 1.75% with a five year grace period.

Although legislators gave government the go-ahead to access the loan, concerns pertaining to the hydro power project were brought to the limelight.

Fidéle Mitsindo and Judith Kanakuze asked the minister whether other stakeholders, especially the Nile Basin countries and the World Bank had been consulted about exploiting the Nyabarongo wetland.

The Nile Basin Initiative is a regional partnership of Nile basin countries launched in 1999 for long-term development and management of Nile waters.

"Consensus must be reached first before anything is done along the river. Has this been put into consideration?" asked Kanakuze.

Responding to their queries, Musoni explained that, "we normally don’t ask for permission but we only inform them (Nile Basin countries), and in this case, we notified them and they did not object."

"You cannot do a project without including an environmental study in the notification," he said and added, "even that was included."

Jean Marie Vianney Gatabazi raised concerns over the tendering process and especially why two Indian companies are the ones to construct the project.

"Was there any conditionality attached to the loan agreement, is construction part of it?" he asked. The legislator also inquired about the project’s time frame and effect on power costs.

"The Indians have started a process of export promotion and so these are export promotion funds" Musoni explained. "They give money but also give conditions."

Accordingly, Indian companies must get involved in the construction process and, 85 percent of the equipment needed for construction will be bought from India.

Musoni further explained that like all countries do, "what we did was to participate in the process of selection and carry out due diligence." He stressed that a Canadian company was employed to help supervise the process and check the quality of equipment used in the project among other things.

"We can only mitigate risks," he said "we shall continue close follow-up using this Canadian company and our own team."

On timing, Musoni explained that ground work is likely to start in September.

"The work will take up to 45 months and in 2011 the power will be in our grid."

Musoni also assured legislators that the project will impact positively on power tariffs. He said power from diesel engines, methane gas and hydro will bring tariffs down.

While responding to Evariste Kalisa’s environmental concerns, he pointed out that the studies conducted show that there will be no problem. Aaron Makuba suggested that Rwanda should look into nuclear energy production in a bid to diversify, an idea the minister promised to look into.

Africa Budget Reform initiative Legislators also agreed to the ratification of an agreement relating to the Collaborative Africa Budget Reform Initiative (CABRI).

"This is an issue that bothers many people and governments and it has been realized that there should be a coordinated way of budget management," Musoni told parliament.

He explained that CABRI must have a guiding law because it will have a secretariat, a budget and offices among other things as required.

"This is an African designed approach," he said, adding, "We have got a responsibility to cooperate with other Africans in development."

CABRI seeks to improve on Public Finance Management in Africa through bolstering the capacity of senior budget officials and expanding existing knowledge.

Further on Monday, Parliament reviewed the basis for passing a draft law governing the regulation of the insurance sector and, a draft law for control mechanisms on government assets.

Parliament started a two-week recess Tuesday evening after concluding two successive extraordinary sessions. Normal plenary sessions are expected to resume June 5 but the special parliamentary committee sessions continue working.

Ends