Basics of Nepali Hydro-Diplomacy

(Courtesy: Dipak Gyawali)

After visiting the dry American West, which has had chronic water problems, the irrepressible Mark Twain remarked, in his inimitable but facetious style, "Whisky is for drinking: water is for fighting over!" Almost a century later, the UN Secretary-General Boutros Boutros-Ghali, in a widely quoted remark, said that the next war would be fought over water. It is difficult to imagine that the UN head was being as facetious as the American humorist, but we do know that many water experts discount water wars as a possibility. If wars will be fought, they will not be over water; but bad water relations may contribute to chronic bad blood between countries that will then exacerbate other more vexing grievances, which in turn may trigger martial responses. There is something about water – and the need to ensure its sustainable harvest over many years and generations rather than any one-time mining – that requires for its harnessing a strong degree of mutual cooperation within and between countries over an extended period of time. It cannot be done in the manner of surrounding a mine or an oil well with a security cordon and extracting the resource.

This deep-seated difference between petroleum and water leads us to a few broad conclusions: water does bring bounty if properly harnessed but assuring hydrodollars from its exploitation is fundamentally a different enterprise from earning petrodollars; around water are plenty of disputed issues but they cannot be resolved by military means; and diplomacy is the proper manner in which water problems can be resolved but it requires in-depth and interdisciplinary understanding of water issues. This short essay will try and link Nepali water history, its successes and failures, with current issues and the role for diplomacy.

Essentials of Diplomacy

Diplomacy has been defined as the management of international relations by persuasion, unlike coercion which militaries engage in after diplomatic efforts have broken down. While subtle hints of possible coercive measures are within the diplomatic toolkits of strong powers, it is against the ethos of good diplomacy especially if it leaves in its wake a sense of resentment capable of bitter harvests years down the road in the most unexpected of ways. Diplomacy should not be confused with foreign policy, because the latter is something publicly stated after a broad domestic political consensus, while the former consists of activities conducted away from public glare. Diplomacy is the chief instrument through which foreign policy goals, its primary strategies and broad tactics are implemented. Water diplomacy therefore has to first understand the subtleties of policy in general, foreign policy in particular and water policy more specifically before practicing its professional art.

Policy, to use a definition attributed to Henry Kissinger, is "the formula for the use of power"; and with modernization and global trade, the nature of power has shifted the world over more and more away from sovereign lords closer towards the sovereign masses. Ever since Cardinal Richelieu set up the modern world's first foreign ministry in Paris in 1626, "national interests" have come to dominate that formula defining relations between countries which use the power of various resources to further their interests. And what constitutes "national interests" has become the subject of lively debate that can, in this day and age, be resolved only through a vibrant democratic process wherein plural voices are not shut out but heard with sympathy. In Nepal's case, it was the Sadr Munshikhana which handled the regime’s affairs with Mughlan to the south and Bhot to the north, but it was essentially concerned with protecting the interests of the Rana sovereigns. "National interest" was practically synonymous with the interests of the ruling family, which was not surprising given the virtually non-existent industry or weak commerce, and hence no social carriers of any weight for these interests.

Symptomatic of this nadir was when, during the Rana shogunate, the Nepali consul general in Calcutta was referred to among the bhardars as “Buying Agency Ko Haakim”, signifying the total subordination of the Munshikhana to the domestic needs of Rana palaces. The legacy of loyalty and patronage (as opposed to efficiency and innovativeness) has continued even with the democratic changes of various hues since 1951, although small, very small, improvements have been perceptible every once in a while. An example worth recalling is the then foreign secretary Jharendra Narayan Singh practically admonishing King Mahendra in 1966 for not appointing Nepali ambassadors for their skills but gifting the job as a reward for their loyalty (baksheesh, was the word used. See Gyawali, S.P. (2055BS)). Plus ca change plus c'est la meme chose!

Nepal also suffers from a historical legacy that it has done little in recent decades to rectify. Despite the fact that Nepal has traditional water management structures -- whether in irrigation or urban domestic water supply -- that are centuries old, the official water management structures, i.e. various government departments, have been created as a reaction to riparian or development agency push for their brand of water development in only the last half century. Not only has the official water establishment been incapable of linking with traditional irrigation (i.e. the farmer-managed irrigation systems) or drinking water practices (e.g. the uniquely Nepali institutions of dhungey dharos) and thus building on past successes, but it has also been unable to address water management in its entire complexity, especially as they relate to current economic, social and environmental concerns. Given the context of their birth, these apex agencies suffer from an “implementation syndrome” dominated by construction engineering rather than strategic planning. The result has been that the economic, political, environmental and social aspects of water development and its sustainable management rarely figure in the process of defining the “national interest”.

A recent example suffices to illustrate the point: when the Kosi and Gandak treaties were signed in the 1950s, Nepal did not have a firmly established water bureaucracy, as a result of which the idea of having a Nepali “liaison officer” was built into the treaties to facilitate Indian construction activities in Nepali territory. Almost a half century later, Nepal has well-staffed departments both for irrigation as well as flood-control. However, the ineffective (and thus ultimately detrimental to national interests) system of having politically appointed “liaison officers” continues (who incidentally have to receive their salaries from Patna, pay that has been withheld in the past when Nepali liaison officers did not meekly comply). If would have been better if this function was assigned to a first class officer of the Nepal government in the persona of the eastern or western regional directorate chief of irrigation or flood control.

Essentially, the argument being made here from these examples is that the foreign policy of a country is only as strong as the domestic support it enjoys through internal political consensus as well as in-house institutional muscle. A Nepali diplomat cannot conduct economic diplomacy more effectively than the national institutions (s)he represents can deliver on national interests or international commitments. To illustrate this with another Nepali example, there is a vibrant debate within Nepal among contending views regarding water resources development: will the export of hydropower make the country rich (and is thus in its "national interest" to follow an export-oriented path), or is hydropower an input to national production which will make national commerce and industry more competitive, (thus developing cheap hydropower not for export but for domestic use)? Laos followed the first path, but is now having second thoughts (Gyawali, 2006): Norway followed the second path and used water resources development for what she termed "nation building", as did the United States in the immediate years following the Great Depression for a similar national imperative.

No consensus has as yet evolved in the Nepali political sphere regarding the virtues and pitfalls of these two divergent paths, and the debate is quite fierce among the protagonists. What this means is that Nepali diplomacy cannot take a strong position either way in its international encounters on the subject until the domestic debate comes to a natural closure and leads to a forging of common foreign policy on this issue. In that sense, water diplomacy is something that will have to follow domestic political consensus: it cannot precede it, nor can it contribute to the domestic consensus building, except perhaps as a means of information flow regarding international experiences into Nepal and from here to the outer world of potential international investors as honest exposition of Nepali legal as well as socio-political status. And, it will be argued below, Article 126 (of the1990 constitution)/156 (of the current interim constitution), if properly followed, is one of the best institutional means available in generating the national consensus alluded to above, as is the practically moribund arrangement of the Water and Energy Commission.

Distilling Water Essentials

One of the problems with water is that, unlike the fixed territoriality of land, it flows without respecting man-made boundaries, making it difficult to administer not just internationally but also domestically. As a river crosses a boundary, it divides the land it flows over into an upper and a lower riparian. Much of water diplomacy has been focused on devising appropriate international regimes between sovereign nation states. Unfortunately, while the state is one important actor, it is hardly the only relevant political site in the world today for the development of norms of water governance.

Conca (2006) argues that international regime formation, which takes the nation state as the only socio-institutional unit of concern, is only one institutional vehicle currently on the global scene, and even then not the most successful one, where the future of water governance is being forged. The others vehicles are transnational water marketization initiatives led by multinational companies and supported by multilateral aid agencies; the very effective transnational egalitarian protests against large dams, globalization, Third World debt etc; and finally international networks of water professionals with a presence in all these sites but coming together on their own to develop a consensus about good water management through such programs as IWRM (integrated water resources management).

While the presence of the Nepali state agencies in the regime formation site (e.g. the United Nation's Convention on the Law of the Non-Navigable Uses of International Water Courses, 1997) has been weak, it is almost non-existent in the other three non-conventional ones described above, where many of the non-state actors play an increasingly assertive role. In the case of Nepal and her water resources development, these actors are the investors and financiers of water technology as well as the international brotherhood of protestors and critics. The international bankers control the capital and hence the technology linked to it: without their willing cooperation, the larger grandiose water schemes that are constantly dreamed of cannot be contemplated based only on accumulated Nepali capital. The critics cannot be ignored either because no international banker will lend money for a dam project, already an endangered enterprise, if there are ground to believe that it is plagued with social and environmental problems. In the past, activists have successfully led to effectively painful boycott of products as well as disinvestments from companies and banks engaged in un-green or anti-social business; and, despite the talks of bravado by Third World hydrocrats, corporate boardrooms in the financial capitals around the world are extremely sensitive to this new form of moral pressure.

The first wake-up call regarding these new global governance modalities for the Nepali establishment was during the campaign against Arun-3, the 201 MW project on the eponymous river that was slated for construction at an initial estimate of $5300 per kW. That price, together with the conditionalities associated with it, was considered outrageously unfair by activists who cobbled up an international coalition of protest. They were successful enough to force the World Bank and its bevy of bi- and multilateral donors to back out of it in August 1995. Today they have been vindicated by the fact that Nepali private entrepreneurs have succeeded in building the Piluwa Khola hydel project in the same Arun valley, still with no road, at only $1400/kW; and overall the Nepali system has subsequently gained a slew of alternative projects that are providing the national grid a third more electricity than Arun-3 would have, and at half the cost and half the time (Gyawali, 2003)!

The second wake-up call was the Tanakpur/Mahakali episode that tied up the supreme court, the press and the parliament for the first half of the 1990s (details in Gyawali and Dixit 2000). The Tanakpur fiasco was subsumed under a much bigger Mahakali Treaty whose ambitions included building at Pancheswar possibly the highest dam of its type in this part of the world to generate over 6000 MW of power. The detailed engineering design was to have been completed in six months, financing arranged in two years, and the project itself completed in eight years. The treaty was ratified by over two-thirds of the parliament in September 1996 despite fierce opposition by activists and nationalist politicians: today, eleven years further on, far from seeing the completion of Pancheswar, we are yet to see even the completion of the first step, the detailed project report. The primary reason lies with the myopia on the side of the Nepali establishment that, in its bedazzlement with earning hydrodollars from electricity export, failed to address crucial concerns of water rights, common border, socio-environmental issues or that of electricity pricing. Voices were caution on these issues were drowned out by developmental hype; but they are coming back to haunt this treaty, which now needs to be re-negotiated as its ten-year mandate has run out.

These wake-up calls have not been heeded by the state's hydrocracies or the politicians entrusted to provide them guidance. The institutional mistakes of Arun-3, which lay in the FIDC-type contracts (as opposed to fixed-price contracts) which forces the client (Nepal government) to surrender all powers to the consultants and accord them privileged position allowing for open-ended contract variations, were repeated in the ADB-led 144 MW Kali Gandaki as well as in the German-led 69 MW Middle Marsyangdi. The errors made in the agreements regarding electricity pricing, fairness in international contracts, equity over water rights and valuation of regulated water have been repeated in the case of the 750 MW West Seti. They have returned to haunt the water establishment some sixteen years after the initial decision was made in 1994 to develop West Seti as an exclusively hydroelectricity export project: social and environmental activists have moved the Supreme Court seeking redresses on these issues (see Raajdhani, 2007). Indeed, when Nepal is paying Khimti and Bhote Kosi more than six cents per unit for run-or-river electricity, when the cost of undelivered power to Nepali industries (i.e. load-shedding) is sixteen cents, and shops are running generators at over nineteen cents, it does seem unfair that Nepal should be asked to develop storage energy for export at four cents!

What those who are swept away by the hydrodollar hype have failed to appreciate is that all major hydel projects contemplated along the Nepal Himalaya are of a storage type that have regulated water (i.e. monsoon waters that have been stored for release in the dry season) as a major product, at par or even more valuable than electricity. In the semi-arid but very fertile Ganga plains (semi-arid because it suffers from four months of floods and eight months of drought in the monsoon-dominated precipitation regime), electricity can be had from a variety of sources even though they might be more expensive than cheaply developed hydro; but crops cannot be irrigated in bone-dry March to May with anything other than water. And this water for irrigation in Uttar Pradesh or Bihar can only come either from replenished groundwater (which needs electricity for pumping) or monsoon runoff that has been stored behind dams in the Nepali hills (what is called 'regulated flow').

A storage dam's regulated flow, i.e. controlled current that gives rivers below the dam much more water in the dry season than it would have and much less peak flow in the monsoon season, brings about two other major benefits besides irrigation. The first is flood control that saves billions downstream in terms of flood damage and insurance, and the other is improved navigation since the increase in flow would significantly increase river depth. Navigation, compared to irrigation, also has an important environmental benefit: unlike irrigation that draws away most of the water from the river course and uses it consumptively, navigation demands that there be flow in the river, which in turn is also conducive to supporting aquatic life. What is important to remember is that, if a dam is thought of as a factory, the one major investment in it gives at least four major output products: electricity as well as regulated water for irrigation, flood control and navigation. The beneficiaries of all these outputs must pay their share of the investments and cannot be expected to become free-riders.

Even though Nepal's primary interest is in hydroelectricity, it is in her interest to make sure that the cost of a dam is also paid for by the other sector beneficiaries, especially irrigation where the gains from increased dry season flow are enormous. As an example, it must be borne in mind that the Sacramento Delta near the San Francisco Bay has provided more wealth from agriculture by orders of magnitude than all the gold found in California since the Gold Rush of 1849. By ensuring that part of the cost of the dam is paid by agriculture as well as flood-proofed transport infrastructure and municipalities, the production cost of electricity can be brought down considerably. The difference then between what the market is willing to pay for electricity and the cost it takes to produce it would be much larger, and so would Nepal’s overall income from selling electricity. Allowing downstream irrigation and flood protection free-rider benefits would be tantamount to making them so by Nepal importing their floods, and permanently drowning out Nepali villages, just so that the downstream towns and villages can have these benefits. It would also reduce the benefits Nepal could get from selling electricity to the market.

Another myth regarding electricity that has dominated the public mind in Nepal is that water agreements have to be done in hot haste otherwise Bhutan will capture the Indian power market, or that India will develop nuclear power and will have no need for Nepali hydropower. It must be realized that Bhutan has no Tarai to irrigate, nor is the adjacent riparian territory in India (water-rich Assam’s right bank of the Brahmaputra) particularly thirsty for water. Nepal by contrast sits upstream of large swathes of UP and Bihar that are not only water scarce but happens to be the electoral constituencies of most of independent India’s prime ministers and almost half of the Indian parliament (see Gyawali and Dixit 2000 as well as Gyawali 2001). India will need storage dams in Nepal for water alone, even if there were no electricity involved, and Nepali hydroelectricity can only be a very valuable by-product. How valuable is it, is what the vigorous debate currently happens to be concentrated on between state agencies and the socio-environmental activists. Electricity from Nepali storage dams is more valuable than normal electricity because it is what is called “peak power”, i.e. power that is needed at the time of maximum demand for grid stabilization. The more thermal and nuclear power in the north Indian grid, the bigger the need for flexible peaking hydropower to balance the system and prevent its blackout. Furthermore, as the climate change debate heats up globally, there is going to be a high premium on Nepali hydropower as a clean source of energy that can offset CO2 emissions. Hence Nepal’s negotiating position need not be determined by any imperative of haste.

In all the negotiations of the past fifty years, India has not been keen to admit willingness to share the downstream economic benefits of irrigation and flood control from storage dam-building in the Nepal Himalaya, nor does it want to price hydropower at peaking rates. The fault for this, however, lies on the Nepali side for not putting these positions across in a convincing manner. It is, therefore to my mind, the main challenge before Nepali diplomacy to convince their Indian counterparts that it is in our mutual interests for India to recognize these substantive benefits and to propose sharing them equitably. For this to happen, strengthening diplomatic capacity in Nepal vis-à-vis water is the first prerequisite.

Re-Tooling Munshikhana

Fortunately, for diplomatic capacity building in the area of water diplomacy, Nepal does not have to start from scratch. The rudimentary institutional framework exists and only needs re-vitalizing. It is there in form of the Water and Energy Commission, established with Canadian help in the early 1980s and strengthened in 1991 by making its executive member-secretary a full and independent government special class secretary. Its governing board, chaired by the minister of water resources, includes the permanent secretaries of all relevant ministries besides water resources, such as those of foreign affairs, finance, forests, supplies, law, etc., which deal with some aspect or the other of water and energy.

Unfortunately, it has rarely been used. Its opinion on major policy issues were rarely sought, and when sought, and the advice was contrary to the political bias of the day, it was ignored. In the late 1980s, when it cautioned against putting all electricity development eggs into one Arun-3 basket, it was ignored. In the mid-1990s its opinion was never formally sought on the Tanakpur-Mahakali debate, so much so that independent members who served two terms (four years) on its board retired without having been called to attend any meeting! Since then, official postings to WECS, its secretariat were seen by senior civil servants as punishments designed to put careers out on a shunting yard. Despite this sad history, especially of the last decade or so, there is little option but to revive it. Indeed, in order to address the many policy issues related to water and energy in this country, a body such as this commission, if it did not exist, would have to be created afresh.

In reforming and re-vitalizing WECS for the purposes of water diplomacy, several steps need to be taken. The first is to make sure that the chairmanship is not fixed in the persona of the water resources minister but is rotated among the ministers of the different ministries whose secretaries are permanent members of the WEC board. It could be two-year terms that would allow the particular ministry to inject new ideas from its perspectives. A supplies ministry chairmanship might introduce policy ideas about replacing fossil fuel, while a forest ministry tenure could coincide with work on sustainable fuelwood harvesting. When it came turn for the foreign ministry, it might see significant improvement in Nepal's water diplomacy.

A precondition for such policy innovations to succeed is to ensure that senior officials from different ministries are deputed to WECS to work on various policy issues for fixed terms and with fixed responsibilities. As something that grew out of the ministry of water resources, WECS is too engineering-heavy, although some engineers within it have developed some skills in non-technical analysis. The active presence of non-engineering experts from other ministries would allow WECS to more effectively address the social, environmental, economic as well as political issues associated with water and energy development. For the foreign ministry, it might be necessary to add one more requirement: any senior diplomatic posting to riparian countries should require at least a six to twelve month stint at WECS with a relevant water and energy policy study conducted there by that official. In the past, it has been sad that foreign ministry officials have sat in on water talks without an idea of what Nepali river basins are like and what issues are being discussed!

Successful water diplomacy requires understanding the subtle aspects that bedevil the other side. Since the mid-1970s, Nepal's water development has been aid-led rather than domestic enterprise led. This state of affairs has seen the slow ceding of the driver's seat to experts from aid agencies, with Nepali officials playing a mere liaison role. The fallout from this passivity has been that Nepal's officialdom had made little effort to understand what the Indian water debate is all about or what kind of institutions mediate in these debates and conflicts. The above arrangement of a re-vitalized WECS could be one effective manner of training our future diplomats to understand the hopes, aspirations and constraints of water and energy facing our neighbours. It will also help them explain to the neighbours the subtleties of water politics in Nepal. In the end, by creating a cadre of diplomats fully aware of the concerns of both sides, it may be reasonable to hope that we will be led away from the impasse of the past to more practical, do-able joint efforts in harnessing our water and power.

References:

Benedick, R. E. 1991. Ozone Diplomacy: New Directions in Safeguarding the Planet. Cambridge, MA: Harvard University Press.

Conca, Ken. 2006. Governing Water: Contentious Transnational Politics and Global Institution Building. Cambridge, MA: The MIT Press.

Gyawali, D. 2006. Mekong River Commission, Resurrected Parliament and Section 31 (in Nepali). Samakaleen Weekly 11 July, Kathmandu.

Gyawali, D. 2003. Rivers, Technology and Society. London: Zed Books (Nepali edition published in 2001 by Himal Books and Panos South Asia, Kathmandu, as Water in Nepal ).

Gyawali, D. 2001. Water beyond the State: Resolving Conflicts with Institutional Pluarlism. In P. Shahadevan of JNU (ed) Conflict and Peace Making in South Asia, Lancer’s Books, New Delhi.

Gyawali, D. 2000. Nepal-India Water Resource Relations; chapter in I. William Zartman and the late Jeffrey Z. Rubin (ed) Power and Negotiation, International Institute of Applied Systems Analysis (IIASA), Vienna and University of Michigan Press, Ann Arbor, Michigan, USA, 2000.

Gyawali, D. and Dixit, A. 2000. Mahakali Impasse: A Futile Paradigm’s Bequested Travails, in D. Kumar (ed.) Domestic Conflicts and Crisis of Governability in Nepal. Kathmandu: Center for Nepal and Asian Studies (CNAS), Tribhuban University. (Earlier version published as Mahakali Impasse and Indo-Nepal Water Conflict in February 27-March 5, 1999 issue of Economic and Political Weekly, Bombay:XXXIV, 9: 553-564. The EPW article with a 2004 postscript published in 2005 by Sage Publications India in Samir Kumar Das (ed) Peace Processes and Peace Accords.)

Gyawali, S.P., 2055BS. Byakti Ra Bichaar: Ek Vakil Ko Sansmaran Ra Chintan (in Nepali: Person and Thoughts: Memories and Reflections of a Lawyer), Jagadamba Prakashan #84, Lalitpur.

Raajdhani 2007. Paschim Seti Ma Sarbochha Dwara Karan Dekhau Aadesh (in Nepali: Supreme Court orders show cause in West Seti). Kathmandu: Raajdhani Daily, 13 August.