Friday, August 29, 2008
Thanks to the CA members who have managed to appoint a Prime Minister after exhausting four months, 1/6th of the total time allocated to write the new constitution for the "New Nepal." They have not only wasted the valuable time but also squandered over 3 billion Rupees in salaries and services payments - with no results to show for the money spent. One of the poorest people in the world have paid enough in money, lives, destroyed properties for the appointment of this new Prime Minister.
Soon after his appointment, the PM was off to China to complete a tour started by de-facto Minister, Pradeep Nepal. Until now, every decision taken by the CA has raised serious questions about nationalism and patriotism. Oath-taking by the VP in Hindi to costumes worn by new PM during his swear-in ceremony have fuelled a critical paradigm shift in Nepal’s nationalism and patriotism. Equivocal nationalism demonstrated by the VP and PM has unlocked the doors to a new model - one of ethnic nationalism, a reversion back to the time long before the "Old Nepal" was even created. A clear picture is likely to emerge once Upendra Yadav meets his Indian counterpart and possibly the Indian PM in Madhesi attire. We will be privy yet again, to an historic inauguration of a new nationalism in a "New Nepal."
When nationwide protests were on-going against the VP’s swearing-in, in Hindi, the Maoists and its unions fuelled the issue wherever possible and backed up the protests unconditionally. Their intent was to take ownership of the nationalist agenda. But when it was their turn, Pushpa Dahal took his oath in Western attaire - quite a fashion statement! The VP ignored the national language and the PM ignored the national dress. One trying to be "newer" than the other in a spectacle of nonsensical drama.
But the most fascinating thing is that both individuals have expressed their positions in favour of nationalism - but their modalities are at complete odds. The VP advocated ethnic-based nationalism where as the PM stood for stateless nationalism. Some other minor parties are already representing regional nationalism. In all these different models, what's going to happen to state-based identity and with it, Nepal's collective national identity?
Nationalism remains an important part of relations between states and also of the domestic politics of many countries. Nationalism is now the moral basis of states and of the international system. Throughout Nepal’s history, past regimes have tried to advocate for nationalism to balance diplomacy between China and India. In many instances, Nepal’s nationalism played crucial roles in garnering reciprocal concessions from our neighbours.
Nationalism and the state are new phenomena given the importance they play in international relations today. One of the most difficult theoretical and applied problems of the post-Cold War era has been the search for an adequate understanding of the resurgence of religion, ethnicity and stateless nationalism in international relations. More exclusively, social scientists and policymakers have been challenged to clarify the nature and impacts of religion, ethnicity, and stateless nationalism in both sub-state and inter-state conflicts in the international system. Most observers are convinced that patriotism can leave most people more blind than they should be to their country's political imperfections, something loads of critics have argued regarding Americans since the 9/11 terrorist attacks.
Yet that sort of hyper-nationalism has not often led to the kind of violent conflict which claimed millions of people in the twentieth century. One of the major causes of most of those conflicts has been nationalism of a different kind; one that gets out of hand, turns into hatred of others, and sparks violence, often of the most brutal form. This is especially true when leaders of states can convince people that they have somehow been abused by "others." I don’t want to talk about the interstate war caused by nationalism but in brief, there is no more obvious example than World War II. Japan, Italy, and especially Germany were all led by leaders who stressed unmet nationalist goals and grievances in the years leading up to the outbreak of fighting in 1939. While psychologists and historians still debate exactly how this took place, there is little doubt that the intense emotions felt by leaders and followers alike contributed to the atrocities committed by people from all three of these countries.
There is no realistic possibility of re-creating Nepal as ethnically pure states. For instance, there is no way to envision Hutu or Tutsi states emerging out of either Rwanda or Sudan. Ethnic-based nationalism is just a cheap propaganda tool which helps spread anti-national sentiment. We have seen the results of ethnic based nationalism in Kashmir, Chechnya, Sudan, and most of the former Yugoslav republics. But, the people who take up arms in those conflicts share the same kind of deeply rooted emotions that gave rise to the Nazis.
Similarly, stateless nationalism will not play any effective roles at home or overseas because it fails to develop any strategy in foreign policy or international relations. The unfinished work of Marx in this regard took some momentum through Lenin’s foreign policy but it was not adequate for the 21st century to stay stateless and just live for ideology.
Stateless nationalism has failed to deliver emotional attachment and commitment to patriotism. When these events are left unaccounted, there are risks of losing identity and subsequently losing nationalism and patriotism. A country with a history of a unified nation should never pose different sentiments of nationalism. People must be concerned and awake about this shifting policies on nationalism.
Should we really be shifting our paradigm in nationalism? I do not think we have reached that point to make such a gigantic step - we are certainly not prepared for it. This new government in "New Nepal" should not abandon the traditional concept of state-based nationalism. Nationalism is not an election promise and this country can not afford ethnic or stateless nationalism. The government must concentrate on things that can unite Nepal including national dress, national language, national flag, and our proud history.
Sunday, August 24, 2008
(Courtesy: Ratna Sansar Shrestha)
A friend has said to me (verbally) that “only raising issues does not resolve the problem,” howsoever pertinent the issues are. That is absolutely correct. My excuse for not touching upon this facet in my previous write ups was simply the time the average readers are able to afford or inclined to devote. Besides, I launched this writing spree to ensure that a few errors in the presentations of some eminent personalities do not mislead the intellectuals, bureaucracy and policy makers. Since, his comment has provided me with an opportunity I will write a few paragraph in this respect but I will limit myself to the specific issues I have touched upon in my last write up, in the interest, again, of the time of the readers.
It’s Fresh Water, Not Energy
South Africa pays a lump sum of US $25 million (in 1991 prices) each year to Lesotho (surrounded by South Africa on all sides) for 18 cum/sec of water it receives from Lesotho Highlands Water Project. There is similar arrangement under Columbia Treaty between Canada and USA. For the sake of simplicity using the rate agreed between Lesotho and South Africa, Nepal is entitled to US $ 125 million per annum (equivalent to Rs 8.125 billion pa) from India for the augmented flow of 90 cum/sec from west seti project. To my mind it is as simple as what follows: if India doesn’t want to pay for the augmented flow then Nepal should not sacrifice 2,750 hectare of land to be submerged by the reservoir and 1,630 hectare permanently and 645 hectares partially of her land in Banke district to be inundated by the augmented flow, due to Lakshmanpur “barrage.” Columbia Treaty, too, clearly has provision to recompense Canada for her losing alternative uses of the submerged land, besides the recompense for flood control benefit. It is important to note that the project is going to rehabilitate people to be displaced by the reservoir which will amount to recompense of cultivated land that will be submerged by the reservoir but such land amounts to only 10%. There is no arrangement to recompense for non-cultivated land including forest.
What also needs to be remembered that building a reservoir not only provides augmented flow to the downstream area but also results in flood control for which too the beneficiary needs to recompense Nepal. Columbia treaty, further, recognizes power benefit due to building of the reservoir and she is entitled to one-half of the additional power generated due the reservoir. To draw a parallel here, the specific site of west seti project would have generated 100 MW without the reservoir. Therefore, Nepal is entitled to 325 MW (not meagerly 75 MW).
In this backdrop, therefore, agreements related to west seti needs to be revised accordingly.
India has never acknowledged downstream benefit and she equates free flowing water with stored water which is not one and the same. No one will pay a paisa for the water flowing in any river but the water will have economic (financial, as well) value after adding spatial or temporal utility for which purpose Nepal will be sacrificing, as mentioned above, 2,750 hectare submerged by the reservoir and 1,630 hectare permanently and 645 hectares partially in Banke district, inundated due to Lakshmanpur “barrage.”.
Let’s look at Mahakali treaty in the above light. Nepal is entitled to 50% water from Mahakali River, deemed to be a border river. But, under current treaty India has been given additional 46.5% over and above 50% it is entitled to. Therefore, this treaty too needs to be revised incorporating provision under which India will be obligated to pay Nepal for any additional water over and above her share of 50% that India receives/uses from this river.
Export to and Import from India
People might have jumped to the conclusion that I am complaining about India short changing us in this respect. I just hope that people will not be shocked, if I am to say that what is happening is natural phenomenon in this kind of market. From the perspective of export of power from Nepal to India we have a monopsony market condition and it is but natural that the importer enjoys “market power” and is able to dictate the price. Besides, in the power market it is also a fact of life that longer PPAs fetch lower prices while the shorter ones higher. West seti has a longer PPA term, and has been given lower price while, when Nepal imports power from India we do it for short term, and pay high price.
Having looked at the ground reality, Nepal should aim to maximize use of power generated by harnessing its water resource domestically and also benefit by forward linkaged benefits. Use it to lift water to irrigate, to run cold storage, to set up agro-processing industries, use for industrialization of Nepal, also to set up energy intensive industries. Nepal can escape from current petroleum product crisis significantly by electrifying transportation system (ranging from electric train, trolley bus, etc. to even hybrid car). As I said in my first write up Nepal’s objective should be to harness full economic potential of 43,000 MW for use by the population expected to reach 42 million in 2030 which will result in electricity consumption of 3,594 kWh per capita compared to more than 10,000 kWh of prosperous countries.
However, it does not mean that Nepal should, absolutely, be against export of electricity. What we should do is instead of dedicated power from Nepal’s water resource, Nepal should plan to export energy during wet seasons and off peak hours when it needs to spill her electricity generation capacity while during the same window of time the electricity demand in south is at its peak, thus commanding premium tariff for Nepal’s electricity. In this manner we could easily get out of the trap of long term PPAs.
In order to achieve above I recommend a mechanism under which Nepal should implement as many hydropower projects as possible with domestic investment so that investment linkaged benefit will stay in the country. This does not mean that we should close our doors to FDI. As long as the electricity is used for the benefit of the country who is investing in the project does not matter. My second recommendation is that Nepal should allow projects to be implemented by the investor/s (domestic or foreign) that will generate the electricity at the lowest cost. We should purchase all such power (at low cost) and electrify the nation massively (not just lighting a few bulbs in houses, though) and export the electricity that Nepal is not able to consume at premium price (I wonder if people are aware that India asked INR Rs 7 from a power plant in Tripura from Bangladesh). It should be obvious to all that Nepal may, for example, not be able to use full generation of west seti project for first few years, after that Nepal will be in a position to use close to half of it. In about a dozen years, Nepal will definitely be able to use all electricity generative by this project. I could go on with my recommendations but I think this much will suffice for now.
In order to avoid having to make the tax payers of Nepal pay for decommissioning of west seti project, the better and prudent course is not to build it at all under present arrangement. However, if India is willing to recompense Nepal for (1) flood control, (2) augmented flow in the dry season and also (3) pay reasonable price for peak-in power, then we should allow it to be built on the condition that the developer company will set aside a certain portion of the cost of decommissioning and deposit it with GoN each year such that by the time the project is handed over GoN will have necessary fund to decommission it.
Nepal's Hydropower - Deconstructing a Few Mythshttp://nepaliperspectives.blogspot.com/2008/08/nepals-hydropower-deconstructing-few.html
Thursday, August 21, 2008
(Responses provided by author to comments on original post located at the following URL: http://nepaliperspectives.blogspot.com/2008/08/nepals-hydropower-deconstructing-few.html#comments)
It is clear from a number of comments to my first write up on the subject that it will not be possible for the politicos to continue to take Nepali people for ride. Every time Nepal passes through the transition (politically unstable) period Nepali politicos give away Nepal’s vital interests. 1950 treaty set the ball rolling on this path during the 20th century, merely to have Koshi, Gandaki and Mahakali Treaties (starting from Tanakpur “Understating” to Mahakali package) to follow in its wake. With the demise of “Panchayati democracy,” a new trend got underway entailing Nepal to surrender rivers to private sector in the name of export oriented projects. Examples of this new trend manifests in West Seti, Upper Karnali and Arun III projects.
It’s Fresh Water, Not Energy
One thing is common in all these treaties and agreements – ensuring fresh water for India. Without spelling it out explicitly, Nepal’s right to water in these rivers have been ceded. The issue in terms of downstream benefit in the case of reservoir projects is relatively easy to understand (some politicos refuse to understand the value of stored water while going about lamenting that water flowing in rivers, for which no one will be willing to pay a price without adding spatial or temporal value to it, is going awaste). West Seti project, for example, augments the dry season flow in the downstream areas in India by 90 m3/s, equivalent to 7.77 billion liters per day. In order to understand the value of such water one needs to know that Nepal is planning to invest in the order of Rs 30 billion to bring 170 million liters per day into Kathmandu. Had West Seti project been conceptualized as a multipurpose project, there would not have been an issue of downstream benefit to India. However, as there are no plans for Nepal to benefit from the augmented flow, India will receive such stored water free of cost, besides benefiting from flood control benefits. The issue here is why Nepal should inundate over 4,000 hectares of its land (to build the reservoir and due to inundation in Banke district as a result of Laxmanpur barrage and augmented flow) and displace over 30,000 people just to provide additional water to India during dry season, free of cost. Politicos and bureaucrats sermonize that Nepal is free to use such water while it flows within Nepal. But without a multipurpose project being conceptualized for Nepal to use such water, India, after using the augmented flow during one season, will start asserting the principle of “existing prior consumptive use” and Nepal will lose the right over such bodies of water permanently. This principle has already been used in structuring Mahakali Treaty to the disadvantage of Nepal. This is one way of gifting precious fresh water produced by storing it in Nepal to India.
One will need to study Columbia Treaty under which Canada is compensated for losing alternative use of the land inundated and also for augmented flow in the dry season from USA, besides the power benefit shared between the two countries for constructing the reservoir project. Nepal should have insisted on using this treaty as a precedent in getting recompense for land mass lost due to submergence (including forest resources, wild life, existing infrastructure, etc.) in the case of West Seti project. But …
Another way Nepal is ceding its right to water becomes apparent with some difficulty. Run of the river projects like Upper Karnali and Arun III do not generate augmented flow and, hence, apparently, no water related issues are involved. But an in depth study will make it clear that water issue is involved even in these projects. Section 20 of Electricity Regulation, 1993 guarantees “Right on Water Resources” which says that “The licensee, who has obtained license for production of electricity, shall have the right to use the water resources for the works as mentioned in the license to the extent of such place and quantity as specified in the license.” As stipulated by this section someone possessing a license to a specific site is guaranteed that no consumptive use of water will be undertaken in the upstream areas of the project, which might entail reduction of flow to the project site. By getting various “investors” to secure licenses to sites in Nepal, India has succeeded in ensuring that Nepal is forced to refrain from using the water for consumptive uses in these areas. In this manner too downstream flow to the Ganges is successfully secured with the issuance of each license and Nepal misses an opportunity to use such water, for example, to irrigate its arable land. In order to put things in proper perspective, one needs to remember that the Ganges receives 41% of its flow from Nepal in the wet season and 75% in the dry season.
On the other hand, although quite a few of Nepal’s hydrocracy (bureaucrats, intellectuals and politicos related to hydropower) believe that India badly needs electricity from Nepal, time has already proven that it’s not so. Take the example of West Seti. If India was badly in need of electricity from this project, Indians would have made sure that this project was built more than a decade ago. In other words, they would not have allowed this project to hibernate for one and a half decade. Same conclusion could be drawn from Mahakali Treaty as well. The detailed project report (DPR) for Pancheswar project was supposed to be ready within six months of execution of this treaty. It’s been over a decade now but the DPR is nowhere near sight. From this it could be easily seen that India is not that desperate for electricity from rivers in Nepal, as is being perceived (and also propagated) by Nepal’s hydrocracy. If indeed India was starving for electricity she could have easily ensured that Pancheswar project (6,480 MW from storage project and 240 MW from reregulating dam) is built and, probably, commissioned by now. By getting Nepal to sign on the dotted lines in the treaty document, India succeeded in legitimizing the use of water in excess of what she is entitled to (50% of the water in Mahakali – deemed to be a border River), which she had been illegitimately using prior to execution of the treaty. And it’s also not that difficult to see that she is in no hurry to get this project commissioned.
Export to and Import from India
Prayasjee has put his finger on the raw nerve. Thanks. The peak demand in last fiscal year, according to NEA’s latest report, was 720 MW. The industrial corridors in Butwal-Bhairahawa, Parwanipur-Birgunj, and Duhabi-Biratnagar are starving for energy for the existing industries. These corridors could use 200 MW each while establishment of new industries and expansion of the existing industries is constrained due to lack of electricity. Dr Amrit Nakarmi has figured out that merely to displace cooking gas (LPG, which is causing NOC to hemorrhage, besides other petroleum products) in Kathmandu valley we need additional 680 MW. By the time West Seti project gets commissioned in about 5 years, in this manner, Nepal’s own demand will exceed 2,000 MW. If Nepal is to try to be self reliant in the matter of energy for transportation and, therefore, electrify its transportation system (ranging from electric train, trolley bus, cable car to hybrid cars) the demand will be much higher. Therefore, I have no choice but to agree with you that it makes no sense for Nepal to endeavor to export electricity when she herself “doesn't have enough electricity” as you have very aptly put it.
Prayasjee, there is also fiscal tragedy inherent in this export-import “business.” It costs about Rs 21/kWh for NEA to generate peak-in power (from thermal plants) but peak-in power from West Seti project is slated to be exported at around Rs 3/kWh (US $ 0.0495/kWh). Further, Nepal is importing electricity from (the same) PTC at prices ranging from Rs 5.58 to Rs 6.50, for any time during the day and during all seasons, in 2006 (I don’t have the applicable rate for 2008 which is bound to be higher). After knowing this, I have to agree with you that it not only “sounds really stupid,” but it’s really stupid on the part of us (people in Nepal – for tolerating such a hydrocracy and the leadership all these years).
Prayasjee, you are also right with respect to the hype created by the hydrocracy about Nepal becoming rich after getting the project handed over after 30 years “free of cost”. As the old saying goes, it will be tantamount to us going about bragging that we have put on some weight while it was merely a case of swelling of the body. Besides the point you have rightly raised, there is the issue of decommissioning which both the hydrocracy and the project people don’t like to talk. Although the main source of Kulekhani reservoir, for example, is not river based, the dead storage of this reservoir is already 25%. In other words, the capacity of Kulekhani reservoir has diminished to 75% of original capacity in about 25 years. Seti River carries high silt load and West Seti project will transform into a run-of-the-river project from the reservoir project in about 30-40 years. At that time, after getting it handed over to Nepal, this project’s dam will have to be decommissioned. As the private sector has not provided any budget for this purpose, the government of Nepal will be forced to spend money for this purpose. Meaning, when Nepal is supposed to be “enjoying” electricity from this project handed over free of cost, she will be forced to shell out money for decommissioning which will be costlier than the origial project cost.
Hiding behind the shield of anonymity one commentator has alleged that I was trying to fool “innocent Nepali readers.” It seems s/he her/himself is trying to fool the readers while forgetting that the readers are much more informed than s/he deigns to think. I earnestly hope that s/he will desist from doing so soon. S/he attempted to prove the point by explaining that PTC is not the only buyer and went on to “try” to enlighten me by listing some other “could be” buyers. Existence of other buyers in India and PTC being authorized to be sole buyer of electricity from Nepal (thereby leading to monopsony market situation) is very different. Once other potential buyers also become authorized to play in this market the monopsony market with regard to export of electricity from Nepal will cease to exist. I am sure that s/he is aware of this. I am obliged to other commentators who also have pointed this fact out.
S/he also says that “The going rate for a PPA with PTC is Rs। 5।30...that is why West Seti project is not taking off...they signed a terribly bad and unfeasible deal।” If that is the case then the proponents of West Seti people are better off by canceling current PPA with PTC and asking for new one with the rate s/he (the particular commentator) has quoted। In any case, the point I was making in my original write up was that expecting PTC to pay Rs 5।13/kWh from even run-of the river project is an over estimation when PTC has agreed to pay merely around Rs 3/kWh for peak-in energy (I am sure that the commentator is not “innocent” to the extent of not understanding the difference between the energy generated by the two types of projects)।
I request Damanjee to note that PTC hasn’t offered West Seti Rs 5.13 per kWh, rather around Rs 3/kWh only (US $ 0.0495/kWh). The website for Department of Electricity Development is http://www.doed.gov.np/
Nepal’s Economically Feasible Potential
The anonymous commentator has even called me a “theoretical man” based on the fact that I have used 43,000 MW to compute per capita electricity that will be available to the people of Nepal। S/he needs to remember that I was merely using a number that is being used by government authorities including Water and Energy Commission of GoN। S/he needs to remember that I was not endeavoring to establish a correct number for Nepal’s economically feasible potential contrasted with what is currently official accepted number। I, however, agree with her/him that “this number will continue to go up with more infrastrucute (sic) being built and PPA rates going up” and potential virgin sites being identified.
S/he goes on to allege that I don’t “have a clue as to how energy royalties are calculated” and goes on to talk about gross and net energy। It is common knowledge that there is no monopoly or monopsony whatsoever in the matter of understanding the difference between gross and net (and Damanjee also says that I “may not know the difference between NET and GROSS (based on royalties))।” Being a Fellow of Institute of Chartered Accountant and also a student of both management and economics (also having taught in Tribhuvan and Kathmandu Universities for over 3 decades), it’s not possible for me to deny knowing the difference between NET and GROSS. However, my whole and sole point in the write up was: it’s practically impossible for Nepal to earn the royalty at the rate of US 1.5 ¢ per kWh at currently prevalent tariff rates for electricity, under current Nepal law. In order for Nepal to earn royalty at the rate of US 1.5 ¢ per kWh under existing law, as I have mentioned in my write up, the tariff will have to be US $ 0.60/kWh – which is well neigh impossible even in the near future, unless applicable royalty rate is revised upwards to 25% by amending the relevant law and Nepal starts exporting electricity at the rate of US 6 ¢ per kWh.
Nepal's Hydropower - Deconstructing a Few Myths
Wednesday, August 20, 2008
(Readers are advised that this write-up was originally published in July of 2000. Some of the facts have changed since. The objective in re-posting this write-up is to provide further context for the on-going debate on water resources)
Development aspects of the Himalayan Kingdom of Bhutan known locally as Druk Yul (The Land of the Thunder Dragon) are strongly guided by philosophies of Buddhism which have played and continue to play a fundamental role in the development of Bhutan and its people. Preservation, being one of the guiding philosophies of Buddhism has led Bhutan to refrain from reckless and haphazard over-exploitation of its natural resources. As a result of this philosophy, Bhutan has today a forest cover of 72.5 %, 700 species of vascular plants, 1770 species of birds and 250 species of mammals and stands out as one of the best preserved ecologies in the world and has been declared as one of the ten diversity hotspots in the world.
Bhutan also stands out as a land of ancient culture, where the codes of dual secular and religious governance promulgated by Shabdrung Ngawang Nangyal in the 17th century still forms the basic tenet of governance, way of life and worship even in modern Bhutan.
The guiding principle of development in present day Bhutan is the principle of the “Middle Path” which stresses economic development together with environmental and cultural preservation and spiritual enhancement of the people. King Jigme Singe Wangchuk has also given a new definition to development in Bhutan by declaring that progress should be judged not by GNP (gross national product) but by “gross national happiness”.
While being reluctant to rapid changes, the Royal Government of Bhutan (RGOB) is keen to provide benefits of modern development to its people. To this end, 19 out of 20 districts of Bhutan are already connected by a network of 3200 kilometers of roads to provide access of development benefits to its people. Great stress is laid on health service which in completely free and on education which is free for the primary and tertiary levels. Consumer cost of electricity is probably the cheapest in the world with the urban consumer paying Nu 0.70 (N.Rs. 1.12) per unit (Ngultrum, Nu, is the local currency of Bhutan and equivalent to the Indian Rupees in value) and rural consumers Nu 0.50 (N.Rs. 0.80). By education and family planning RGOB has targeted reducing the population growth rate from the current 3.1% per annum to 1.3% by 2012.
The philosophies of preservation naturally limit the areas from where Bhutan can generate revenues for its overall national development. Although the country has a vast land under forest cover, timber export is banned and logging is undertaken under strict environmental control and only by governement agencies.Although Bhutan is known to be rich in minerals mineral quarrying is strictly regulated for environmental reasons . Bhutan views tourism with reservation and as a possible threat to its culture and environment-if uncontrolled. As such Bhutan has a policy of reglulating tourism by its pricing mechanism, whereby a tourist pays around US$ 200 per day while in Bhutan. Although agriculture is the predominant occupation of 85% of the rural population, land suitable for agriculture is limited to the southern terai and isolated pockets the central valleys and 7.8% of Bhutan is under cultivation. Bhutan is not self-sufficient in food grain production but has developed horticulture and apples grown in the temperate north and mandarins grown in the sub tropical south are exported in limited quantities.
Bhutan has, therefore, adopted a long-term strategy to exploit its hydropower resources to foot its development bills. Bhutan, like Nepal, is blessed by abundant hydropower resources . The 20 year Power System Master Plan (PSPM) developed with World Bank assistance estimates that Bhutan has a potential of economic generation of around 20,000 MW of hydroelectricity from the four major rivers – Ammochu, Wangchu, Punatsangchu and Manaschu all draining south into the Brahmaputra in India.
Currently Bhutan generates 357 MW of electricity. Chukha Hydel project with a capacity of 336 MW is the biggest power plant currently in operation in Bhutan.
Three hydropower projects are already under construction in Bhutan currently and are to be completed soon. The first stage of the Basochu HPP (60.8 MW) capacity is to be completed in June 2001, Kurichu HPP (60 MW) in September 2001 and Tala HPP (1020 MW) in the year 2004. The Kurichu HEP will generate 322 GWh of energy and will feed electricity to 7 eastern Dzonkags (districts) and the Dugsum cement plant Nanglam. The Basochu HEP will generate 291 GWh of energy and reinforce power supply to 10 Dzonkags in western Bhutan.
The Bunakha Reservoir Scheme (180 MW) is likewise ready for implementation and is to be completed during, the 9th FYP ending 2007. It will generate 688 GWh electricity annually and contribute, 101 GWh of additions energy to the existing Chukha project and further cascade effect on the Tala project.
On completion of these 4 projects the power generation of Bhutan will increase to over 1678 MW.
In addition to the hydropower projects mentioned above which are already under construction or in a preliminary stage of implementation, Bhutan has prepared DPR’s and detailed feasibility studies of a number of mega projects.
The DPR of the 4060 MW Sankosh project is already completed but its implementation delayed due to environmental concerns. Detailed feasibility studies are being conducted with Japanese Government assistance for generating 1410 MW from Wanduephodrang river in two stages : Stage I of 760 MW and Stage II of 650 MW .Feasibility study of the 265 MW Mangdechu Hydropower Project near Kunga Rabten is being undertaken under Nordic assistance.
Besides India, foreign governments such as Japan, Austria, Norway, Netherlands, World Bank, Asian Development Bank and UNDP have generously contribution to the energy sector development in Bhutan. The Austrian Government is providing AST 350 million for the Basochu Scheme with 51% grant and 49% interest free loan. The Japanese government is funding the development of the Wangduephodrang scheme and Norway funding the Mangdochu scheme
But by for the most stable and important partner of Bhutan for developing its overall economy and hydropower has been India. A watershed in the history of cooperation between Bhutan and India was the commissioning of the 336 MW Chukha Hydropower Project in 1987. To implement the Chukha Hydropower project, India and Bhutan signed an agreement to be valid for 99 years whereby India would finance hydropower development in Bhutan with a package of 40% loan and 60% grant financing with guaranteed energy buy back provision by India.
This agreement has been beneficial both for power-deficit India and a developing nation like Bhutan striving towards self-reliant development. The commissioning of the Chukha project in 1987 resulted in the doubling of national revenues in Bhutan between 1985/86 and 1987/88. By 1998/99 Chukha HPP alone accounted for 35% of revenue generation in Bhutan. While Bhutan was initially paid a paltry electrical tariff of Nu 0.50 per unit, India has shown substantial understanding and the tariff was increased to Nu 1.00 in April 1997 and further increased to Nu 1.50 in July 1999.
One striking aspect of Bhutan’s power generation is also the very low construction cost per kilowatt. The author and the delegates of DDC Mustang had an opportunity of visiting the 1.5 MW Chumey Hydropower project in Bumthang District constructed at the cost of Nu 43.33 million. The 1020 MW Tala HEP is being constructed with a revised estimated budget of NU 31300 million. And the 60.8 MW Basochu HEP being constructed with a budget of NU 1923 million. All of these projects have been or are being constructed at approximately US$ 700 per KW whereas the construction costs of hydropower projects in Nepal are estimated to vary between US$ 2000 – 2500 per KW.
The facts detailed above indicate without any doubt that Bhutan has adopted a very successful policy for hydropower development. And it is evident that hydropower will definitely propel the little Himalayan kingdom to economic prosperity and self-sustenance not before long.
The success story of Bhutan on the other hand, is bound to draw a myriad questions in Nepal. Some questions that will be naturally asked are: Does Nepal have a viable reason to justify its failure in hydropower development when a smaller Bhutan has succeeded so well ? Is there any viable justification for the high construction and generation costs of hydropower projects in Nepal ? Is it at all probable, that as long as cheap power is available from Bhutan, India will ever look to Nepal for its hydropower needs ? Is Nepal doomed to limit electric generation only to meet domestic consumption and dispense it to the Nepalese consumer at tariffs 5 – 6 times higher than in Bhutan ? And if the answers to the above questions are “No”, is it not high time that the nation’s politicians, planners, bureaucrats and power pundits started a soul-searching to provide a viable explanation to the Nepalese people ?
HYDROPOWER DEVELOPMENT IN NEPAL - THE DEVELOPERS' DILEMMA
Basics of Nepali Hydro-Diplomacy
Nepal Just Lost Rs. 80 Billion
Nepal's Hydropower - Deconstructing a Few Myths
(Courtesy: el Mariachi)
Less than five years ago, no one would have guessed that the leader of Nepal's Maoist party, Pushpa Kamal Dahal (also known as "Prachanda") would become the first elected Prime Minister of the Republic of Nepal. After a decade of unrelenting, terror, murder and degrading the Nepali psyche, Nepal's Maoists are close to achieving their political objective - "capturing" state power.
The Maoists do deserve some credit. Even their harshest critics will admit that the Maoist leadership has more than its fair share of strategic masterminds. This is not to discount the impacts of acute incompetence and self-centered politics that continues to plague Nepal's non-Maoist leadership. But it is fair to also say that the Maoists have distinguished themselves with political machination and foresight of a level that far exceeds the collective intellect of their political contemporaries.
The Maoists' have masterfully accomplished their end-goal by leveraging every available opportunity to their political advantage. Twice, State forces had beat down the Maoists' insurgent capabilities and at both times, the Maoist leadership came to the negotiating table while their fighting forces re-grouped and re-armed. The Maoists' even recognized opportunity when King Birendra's family was murdered. They wasted no time in blaming the multiple murders on the new King, Gyanendra, and essentially, fed off of the public's standing discontent with the Gyanendra and his son.
When former King Gyanendra took over, the Maoists turned a life-threatening situation to their advantage by forming an alliance with seven political parties (including those who commissioned the war against the Maoists). Having eliminated the Royalist and military threat, the Maoists have now discarded the Nepali Congress - a party the Maoists were able to manipulate to the maximum extent through the NC's "Achilles' Heel" - Girija Prasad Koirala's never-ending lust for power.
The Maoists' have leveraged every agenda from republicanism, to nationalism, to ethnic determination, to gender-based politics, to federalism, to human rights - each, depending on time and situation. When examined over a continuum, the contradictions inherent to various Maoist positions is apparent. But, the Maoists' have managed to sell their changed positions as "adaptations" (or flexibility) as opposed to the tactical maneuvers they really are; the Maoists' have managed to keep the Nepali public focused peripheral issues and their political opponents, guessing and in disarray.
Nepal's Maoists' have also used civil society and the INGO community as stepping stones on their path to power. Politically speaking, there is nothing wrong with the manner in which the Maoists have campaigned - they have operated under the same constraints as their political rivals. However, there is one differentiator between the Maoists' political campaign and the campaigns of others. This differentiator is the subtle (but ever-present) threat of violence.
Whether through the PLA, the YCL, or through their unions, the Maoists have always retained a credible (and demonstrated) penchant for the application of force. Meanwhile, Nepal's liberal elite (domestically and abroad), have continued to focus on the more progressive aspects of the Maoist agenda while turning a blind eye to the not-so-progressive, power plays that actually enable the Maoists as a force to reckon with.
The height of hypocrisy has been so-called civil society leaders expressing fear for their lives in private and then praising the Maoists' in public. The Maoists using the human rights lobby to neutralize the NA's most effective counter-insurgency unit - "Brigade #10" - while burying documented human rights abuses of their own (during the war and during the on-going peace process), is also an "exemplary" feat. For the Maoists, the entire peace process has been a one-way street of "take, take and take some more." This, according to the international community and the gainfully employed UNMIN, has been indicative of the "success" of Nepal's peace process.
Consider for example, the number of concessions that the Maoists have gained from a single demand they continue to agree to meet and then flout - the return of seized properties. Or, consider the Maoist leadership's promise to curb violent YCL activities and more recently, to disband the YCL. The first promise will never materialize; the second one has more potential since the Maoists' have figured out how to disband the YCL only to recreate it under the illusion of a "Youth Ministry." The net result of both examples is the same - the Maoists retain the initiative while their rivals remain helpless. Ironically, it is what the Maoists do (and how they do it) that makes their opponents "reactionary."
When any other party challenges the Maoists', the peace process comes under threat; but as long as the Maoists get what they want, the peace process remains on track. This however, is about to change. As the head of the interim government, the Maoists' no longer enjoy the luxury of opposition. With Pushpa Dahal as Nepal's newly elected Prime Minister, over night, the Maoists have become front and center of the peace process, of the nation's governance, its foreign policy and the constitution-writing process, all at the same time.
Using the Nepali Congress as a diversion to focus public angst is not going to be as easy as it was when Nepal had a Monarchy to blame everything on. Hydropower is not the panacea the Maoists have painted as the solution to Nepal's economic woes. Taxing aphrodisiac sales my have helped the Maoists with their insurgency but it is hardly something that can be relied upon as a GDP enhancer. The Swiss model of federalism works best for Switzerland because Switzerland isn't where in Nepal. These are all realities the Maoists will have to face.
According to work cited by best selling author Malcom Gladwell, 150 persons (or less) is the optimal number when it comes to operational efficiency (decision making). While there are certainly levels of acceptable efficiencies, 601 (the number of individual in the constituent assembly chartered to write Nepal's new constitution) appears "slightly" suboptimal. The "logical end" to the Nepal's peace process is not as forthcoming as Mr. Dahal would have us believe - unless of course, the "logical end" by Dahal's definition differs from the "logical end" as envisioned by others.
Whatever the case may be, the time has finally arrived for the Maoists' to put their money where their mouths are and deliver on their populist rhetoric. The "people" want a "Switzerland" in Nepal and they want it yesterday. The educated Nepali elite want a liberal democracy. China wants the Tibetan issue to disappear. India wants whoever is in power to continue reporting to New Delhi on a periodic basis.
The international community (especially the UN) has done an excellent job of crediting the Maoists for being pragmatic in their political approach. The Maoists for their part would do well to continue being as pragmatic in leadership, as they were in opposition. A few useful tips to Nepal's new Prime Minister may come from News Week Editor, Fareed Zakaria; both from Zakaria's seminal writing ("The Future of Freedom") and from Zakaria's very bold and pragmatic recommendation (in News Week - http://www.newsweek.com/id/151731) that the Bush Administration's second term policies are balanced and should be continued irrespective of which presidential hopeful reaches the White House, this Fall. There are lessons for Nepal's Maoists in all of Zakaria's work.
Unfortunately, for brilliant minds like Fareed Zakaria, Nepal is at best, a data point. And since it is unlikely that Nepal has Zakaria-equivalents on stand-by to advise the country's new Prime Minister, Mr. Dahal may wish to spend a little less time attending Olympic fanfare and more time thinking about drafting Nepal's new constitution. He may also want to take a few notes from Zakaria's writings on "illiberal democracy." Then again, a "liberal autocracy" may be of more interest to Dahal.
State of the Nepali State - Equilibrium nowhere in Sight
End the Immoral Politics
Endless Possibilities in the Republic of Nepal
All the Right Agendas
Tuesday, August 19, 2008
The NA (Nepal Army) was forced to take out its ceremonial cloak as the pace of Maoist Insurgency intensified. Presently, the insurgency (at least in theory), has ended. The NA played a vital role in containing the Maoist insurgency. There was a great expectation that the army would crush the insurgency. But this did not happen. Now is the time to analyze why.
Nepal's civil war was provoked by the Maoist insurgents. Only after the NA was attacked did the government of the time (after exhausting other means available), authorize the use of military force. The goal was to swiftly end the violence and bloodshed. But there was nothing swift about the government (or the NA's) reaction.
Why was the NA's operational reaction so retarded? What went wrong in their preparation during pre-mobilization? Was there a serious leadership flaw in that they could not foresee operational requirements of the future? Liddell Hart said "If you want peace prepare for war". Where was the application of this motto? There has been less effort spent on postmortem of the NA leadership's dereliction of duty than the issue deserves.
The involvement of the NA during counter-insurgency operations opened a "Pandora's box." The myth of an infallible Army is no more; the people were able to assess the NA's performance during the insurgency from many different dimensions. The people of Nepal saw Nepal Army through the prism of elite Generals. The army's conduct during the insurgency period created an environment of mistrust between the field commanders and the Generals in Army HQ.
The burden of the war was laden completely upon tactical commanders. This is most likely why the NA experienced tactical victories throughout their counter-insurgency campaign, but a strategic defeat overall. Against this backdrop, it is prudent to ponder the generalship of the army.
In his book "Generalship-Its Diseases and Their Cure," General JFC Fuller draws upon his knowledge of World War-I. He posits that for the first time in British military history, something went terribly wrong with the quality of leadership of senior British officers during World War-I. "Sometime before the outbreak of the World War," Fuller writes, "the art of soldier-ship slipped into a groove and became materialized…the more management or command became methodized, the more dehumanized each grew."
Before World War-I, the ordinary soldier had seen Generals in the thick of the action, but by 1914 soldiers rarely saw their top brass; perhaps, the front line men heard of their leadership, as managing directors sitting in dug-outs and in offices. Frequently, the soldiers did not even know the names of their commanding officers. To the average solider, their top brass were no more than ghosts who could terrify but who seldom materialized; hence battles degenerated into subaltern led conflicts just as manufacturing had degenerated into foreman controlled work…the man was left without a master – the general in flesh and blood.
Emphasizing John Ruskin's words that "if war is bereft of the personal factor in command, it cannot but degenerate into a soulless conflict in which the worst and not the best in man will emerge," Fuller argues that the true General "is not a mere prompter in the wings of the sage of war but a participant in its mighty drama, the value of whose art cannot be tested unless there is a clear possibility of the struggle ending in death." Fuller concludes that that there are 'three pillars of generalship: courage, creative intelligence, and physical fitness; the attributes of youth rather than of middle age." Fuller insists that World War-I generals were not cowards; rather an "…amazing unconscious change…rose out of the Franco-Prussian War and obliterated true generalship, de-humanizing and de-spiritualizing the general until he was turned into an office soldier, a telephone operator, a dug out dweller, a mechanical pressor of buttons …as if armies were a …soulless machine." The way above Fuller hit the disease then he diagnosed it: "In war it is almost impossible to exaggerate the evil effects of age upon generalship, and through generalship, on the spirit of an army … First, war is obviously a young man's occupation; secondly, the older a man grows the more cautious he becomes, and thirdly, the more fixed his ideas …. Youth, in every way, is not only more elastic than old age, but less cautious and far more energetic."
Fuller's writing provides much insight into the NA's performance. Were our Generals incompetent cowards or were they inaccessible ghosts which prevented the creation of a viable counter-insurgency campaign? There definitely was a flaw in the generalship of NA because they were unable to implement the effectiveness of a "Unified Command" as had been done by great Generals like Templar and Briggs during their Malaya campaign.
What could the reason be for such incompetence? The only one that comes to mind is that the NA's Generals were more socially (status) oriented versus task oriented. The reason could be they didn't know what they were doing and were provided with a plethora of facilities beyond the socio-economic standards of the country. The result was a complete failure to evolve 'strategic guidance' and neglected operational coherence. The war was mercifully left on the shoulders of tactical commanders. It is not that the NA lost because the Maoists were superior but that the NA's leadership was so incompetent that the Maoists looked like strategic geniuses.
There is also another school of thought that explains the NA's lackluster performance - the political system was not conducive for the NA to wage war against insurgency. This explanation however, is hollow.
The first responsibility of every officer is to protect his men from illegal and immoral orders issued by politicians known to be lying to the public. The blame would go to the NA for making former King Gyanendra a scapegoat by not challenging (and according to first hand accounts, even encouraging) his immoral actions. The present day NA leadership has little right defending their institution as constitutional stalwarts and protectors of democracy; they all failed to display the quality of Generals when they accepted orders that sent men into harm's way, without a politically acceptable objective. It is the generalship of the NA who should share a piece of the "blame pie" for leading the Nepali State into the chaotic situation today.
The rank and file of the NA is tired of listening to the same rhetoric on the commitment of the NA to Nepal's constitution. The Generals should know that every officer has the responsibility under the constitution to defend Nepal against all enemies, domestic and foreign - executing this function also means refusing to obey illegal and idiotic orders, no matter where they come from. Resignation on moral grounds is the option that NA General's should have taken. It is the moral duty of not only one but all of the Generals to come to the forefront to correct the impending misdeeds of those that command them.
The system that produces Nepalese Generals has done little to reward creativity and moral courage. Only very few Generals had a clear vision of what future conflicts would look like and what capabilities the Army has to develop to prevail in such situations. In light of Maoist insurgency the Generals of the NA failed to exhibit visionary leadership. The state apparatus should create a mechanism to examine the behavior and attitudes of NA Generals. The objective should be to investigate the following question: "Why did many of the NA Generals lack moral courage and competence? And in the post-conflict period, why do many of these same Generals disrespect the souls of the men who died under their command by fraternizing publicly with the Maoists who killed them? Forget values, ethics and standards - is there even an ounce of decency left in these NA Generals?
Asian Centre for Human Rights Report on South Asia - A Cursory Examination of Reporting on Nepal
Moving Beyond Pork Barrel Politics - Integrating the Maoists into Nepal's Security Sector
Debilitating the State’s Security Forces
Dissecting the “feudal” NA
The greatest threat to peace in Nepal is misinformed, misguided, agenda-divine journalists like "The Guardian's" Isabel Hilton
Post CA election Nepal has witnessed a series of political dramas that only few people get to see in their lifetime. Some of these dramas are provocative, some are reprehensible, some are revolting and some are unpatriotic. The beauty is they are all happening in the name of democracy. I am fascinated by this term "Democracy"; "Prajatantra," "Loktantra," "Ganatantra," etc. If we just go back 60 years, we can find the following models of democracy in Nepal:
1. Shree 3 Rana's Democracy (until 2007)
2. Shree 5 Tribhuwan's Democracy (2007-15)
3. Nepali Congress's Democracy (2015-17)
4. Shree 5 Mahendra's Democracy (2017-36- in my view)
5. Shree 5 Birendra's Democracy (2036-46)
6. NC/UML's Democracy (2046-57)
7. Shree 5 Gynendra's Democracy (2058-62)
8. SPAM's New Domocracy, New Nepal & Loktantra (2063 onwards)
Not a bad record where exercising democracy is concerned.
In my own understanding we have always wanted more and more but never really comprehended what precisely we desire. We have always tried to import democracy as a commodity but have always failed to scrutinize the fact that democracy is customizable, but commoditize-able. We have always eyed American or Western European styles of democracy but have always failed to understand our own position from a global perspective. The feeling is somewhat like an army Private aiming to become Filed Marshall within 5 years.
Not that ambition and for title or position are necessarily bad, but shooting for the sky without understanding how to get there (i.e., process), is necessarily chaotic and haphazard. A soldier has to go through standard processes to be promoted. When processes are made up along the way, people like Idi Amin are "born" under the guise of democracy.
Consistent "winners" are those people who have followed standard processes (and challenged processes from within the system) and proved themselves capable. American and European democracies function because they consist of processes, checks and balances (also processes). We must not forget that Western nations too had their fair share of civil war, occupation, expansion, revolution etc. These nations have travelled a long durable enclosure to arrive at their level of sophistication. They got here through processes that were established, customized, improved-upon and meticulously implemented. These nations have are where they are today, also because of visionary leaders and a set of circumstances that permitted such leaders to effectively lead.
Democracy is not some concentrated, ready-made mixture. It takes time to flourish and it needs serious care and love. We have either expected western democracy to be mixed up in our society like a ready made mixture or we wanted a mature and flourished democracy that can guide us towards prosperity rather than us guiding the democracy for our prosperity and wellbeing. We have repeatedly insulted democracy and we have proven history of such abuse. All the major parties and their leaders have failed to refrain from individual and partisan interests. They are always engaged in short term goals and interests rather than working towards the future of the country and its people.
Not just the leaders but we also have amazing people. People describe their association towards some party by blood or some relation rather than their own judgements. Furthermore; almost everybody is associated with some political elements. This is not expected in democracy. Does this happen in the USA or Western Europe? Sovereign people exercise their sovereignty by gratifying or punishing political parties (during elections) rather than joining a party. We need political cadres to help democracy function but if every body is a political cadre, then democracy cannot function because there is no one left to judge the parties.
The very basic rights of democracy will be apprehended if the business of politics is the only business around. For example, the CA had failed to appoint a Prime Minister; the executive head of Government, for more than 3 months as the nation stood by calmly as though such inter-party bickering on a issue like the head of the government, was perfectly normal.. But the way people reacted when a pro-Maoist business man was killed, was pretty stunning.
This is one simple example of how people are so used to or so motivated to rally behind political cause. Why are our cities and streets are so calm even after repeated and horrific acts of political drama? Where are the people to pressurize our leaders to do their jobs? When will the time come when our leaders will work hard for fear of living up to the peoples' expectations rather than the other way around? When will we stop ourselves from treating politicians like warlords?
Democracy and civilisation can neither be bought nor be imported. They have to develop from within and that is not going to happen overnight. We have to fight for a cause. We have to fight for objectively, guided by morals and conscience. We have to fight for the achievable and aspire for the ideal. We should stop fighting based on hearsay and speculation.
Let's look at democracy in our neighbourhood and beyond. We are sandwiched between the largest Democracy and the largest People's Republic. Can we ignore either of them? No. If we move to the East and South, we have Bhutan, Bangladesh, Myanmar, Laos, Vietnam, Thailand and Cambodia. If we look to the North, we have Mongolia, Russia and the two Koreas; and in the South we have Sri Lanka and the Maldives. If we go towards West and North-West, we have Pakistan, Afghanistan, Iran, Iraq, Kuwait, Syria, Lebanon, Israel, Palestine, Tajikistan, Turkmenistan, Kyrgyzstan, Uzbekistan and Kazakhstan.
Is there substantive, liberal (Western style) democracy any where in our immediate or expanded neighbourhood? My answer is 'No'. Every country listed above has tried to define its own form of democracy. China argues for its democracy, so does Bhutan, Myanmar, Maldives, Pakistan and Syria. We should do very sincere home work to identify the type of democracy we want and the type that is most conducive to our country - not what has worked best somewhere else.
Rather than importing democracy, we need to compose our own democracy. We can identify the goods of all democracies and analyse whether they fit our socio-political and economic contexts. In the good old days, people used to call it 'research'. We should work to make Nepal just a Nepal, not New Nepal or a Switzerland in Nepal. We would always remain Nepal and Nepali and let's be proud of that.
Osho once described life as "full of hopes and misery." Let's move away from making the lives of Nepalis full of hopeless hope and non-stop misery..
Endless Possibilities in the Republic of Nepal
An Open Letter to Fellow, Nepali Compatriots
All the Right Agendas
Kanak Mani Dixit The Nuanced
Monday, August 18, 2008
It is was in the late 60s that Dr. Hari Man Shrestha created a sensation by declaring that Nepal has a theoretical hydropower potential of 83,000 MW and economic potential of 42,000 MW. Ever since this disclosure Nepalese in all walks of life were hopeful of the speedy harnessing of the enormous hydro resources and the resultant inflow of hydro dollars into the country for the overall upliftment of the nation's economy. Over four decades have elapsed after Dr. Shrestha's disclosure, but very little has been achieved in the country regarding hydropower development. The current level of hydropower generation in Nepal stands at a meager level of 619 MW. Of this 463 MW is contributed by NEA and the remaining 156 MW is contributed by Independent Power Producers (IPPs). With the commissioning of Middle Marsyangdi Project, Chamelia and Kulekhani – 3 by NEA and other IPP projects there is a possibility that the new total (Vide Table 1 below) from these additions would result in the new figure of 797 MW. Despite the fact that Nepal has such abundance of hydropower potential, it has dismally failed in tapping this vast and essential resource. Less than 40% of Nepalis currently have access to electricity and those who do have electricity are reeling under a (up to 42 hour per week) load shedding schedule. Furthermore, there are no indications that this bleak situation is likely to improve in the foreseeable future.
This slow pace of development of hydropower in Nepal is in sharp contrast to the situation in the immediate neighboring countries. Bhutan has forged an alliance with India and is forging ahead with a fast pace in implementing major hydropower projects and is already exporting 1500 MW of electricity to India. In addition Bhutan has many mega projects ready in the pipeline for implementation. In India, a sea change has occurred in the sphere of power development after promulgation of the Indian Electricity Act - 2003. The states have unbundled their monolithic power utilities and electricity has become a commodity for trade. Small hill states such as Himanchal Pradesh, Arunachal Pradesh and Sikkim have seen an upsurge in hydropower development especially on the strength of the very progressive incentives the developers are receiving for hydropower investment.
If the neighboring countries are faring so well, what is hindering hydropower development in Nepal? This article tries to delve into some aspects hindering hydropower development in Nepal from the perspective of a developer.
1. Policy Inconsistencies
The importance of inducting private and foreign investment in industrial development (and also hydropower development) was acknowledged by the GoN with the advent of democracy in Nepal in the early 90s. To promote industrial investments in Nepal GoN enacted the Industrial Enterprise Act - 1992, Foreign Investment and Technology Transfer Act - 1993, Foreign Investment And One Window Policy Act - 1993. Likewise, to promote private Nepalese and foreign investment in the hydropower sector GoN promulgated the Hydropower Policy - 1992, Water Resources Act - 1992/Regulation - 1993, Electricity Act -1993/Regulation -1993.
The Hydropower Policy 1992 and the related Acts were very progressive, development targeted and provided excellent incentives to develop hydropower in Nepal. Some of the major incentives provided by the policy included - generation license validity of 50 years, income tax holiday of 15 years, income tax (when applicable after 15 years) at rate 10% below prevailing corporate income tax, energy rate to allow 25% return on invested share capital, 1% customs duty only on imported goods for the project, exemption on import license, exemption on sales tax, GoN land to be readily available on lease for the duration of license. Two major projects with foreign investment (Khimti-60 MW, Bhote Koshi - 36 MW) and a few projects with local finance such as Indrawati Project were able to reap the benefits of this progressive policy of GoN.
Less than a decade later, in sharp contrast to the progressive nature of the Hydropower Policy - 1992, GoN promulgated a new Hydropower Policy-2001, which either decreased or totally cancelled the incentives offered by the earlier Policy (Vide Table 2). In particular the new Policy resulted in - reduction of hydropower generation license validity from 50 years to 35 years, incremental royalty payment, scrapping of income tax holiday and bringing the hydropower projects under the usual corporate tax net of 21.5%.
To baffle the hydropower developers further, GoN promulgated an ordinance in July 2006 negating all previous relevant policies and making value added tax (VAT) applicable to all hydropower projects above 3 MW. This ordinance resulted in the immediate escalation of costs of all hydropower projects above 3 MW by 13%.
The above are examples of the inconsistent policies adopted by GoN in the past which has discouraged investors in the field of hydropower development. The risks resulting form the inconsistencies in government polices in Nepal is a major factor inhibiting spontaneity in investments in hydropower.
2. Planning Deficiencies
The development of hydropower in any country is possible only when there is a holistic and strategic planning mechanism in place for planning and implementing all elements of the project infrastructure. The technical and financial viability of a hydropower project depends on not only power related factors (e.g. discharge and head of water) but also the existence of proper supporting infrastructure such as access road and transmission line for power evacuation. To optimize hydropower development it is vital to pursue a basin wise development policy so that the project infrastructure such as access road and transmission line are shared by all projects within the basin. Such a policy is absent in Nepal and project development is undertaken haphazardly and in isolated modes making them expensive.
A well planned transmission network is a vital element for transmission of electricity within the country and also to the neighboring country for export. Despite this basic necessity there is no agency within GoN which is responsible for planning, implementing and operating transmission lines to enable wheeling of electricity within the country and to the neighboring countries.
In the absence of such an agency, even a small hydropower project has to construct the access road and transmission line for its power evacuation and bear the heavy burden of investment in these infrastructures.
3. Licensing Anomalies
The current licensing system of GoN has resulted in a situation whereby licenses are held mostly by individuals with neither the technical understanding nor financial capability of implementing hydropower projects. Presented below is a table (Table 3) prepared based on the information available in the DoED website.
The above facts clearly illustrate that the tendency of hoarding of hydropower licenses is a serious issue and should be addressed with seriousness by GoN. In a recent bid to counter this tendency DoED increased the survey license fee for small hydro power projects from the meager Rs. 150 to Rs. 50,000. This step may not however be adequate and further measures to screen applicants on the basis of criteria such as technical capability, financial capability and other criteria may be necessary.
4. Power Purchase Agreement (PPA) Related Constraints
One of the most important events in the timeline related to private sector participation in hydropower development in Nepal occurred in the year 1998, when the then Minister Of Water Resources, Ms. Sailaja Acharya , took the bold step of promulgating a policy whereby PPA would be readily signed with developers of plants 5 MW and below on standard terms. The standard terms included: wet season rate of Rs. 3 per kWh, dry season rate of Rs. 4.25 per kWh, purchase rates escalated till 5 years at 6% p.a., PPA validity of 25 years, PPA on take or pay/ give or pay basis. This policy has been extremely helpful in triggering a positive environment for hydropower developers.
The developers wishing to venture into the field of hydropower generation have to sign the PPA with Nepal Electricity Authority (NEA) which is the government owned national utility. The figures below depict the situation of the total capacities of projects whose PPAs have been signed and PPAs applied for.
The table below (Table 4) gives a breakdown of 47 projects whose PPA applications to NEA are under process or pending and the reasons provided by NEA for the delay.
NEA should be thanked for supporting private sector development of hydropower by signing the PPAs with IPPs despite the fact that the financial health of NEA itself is in the doldrums. NEA is reeling under the burden of the two US$ based PPAs that were signed for Bhote Koshi and Khimti Projects. The fiscal statement of NEA for FY 2006/07 shows that 44.22 % of the annual expenditure of NEA is spent on paying IPPs for energy acquired against PPAs. The organization is grossly overstaffed with a total staffing of over 10,000 employees. The technical losses are in the vicinity of 24%. In addition NEA has a huge debt servicing cost primarily because GoN levies an interest of 8% on grant aid made available to NEA.
But while being thankful to NEA, developers cannot ignore the many anomalies that exist as related to the PPA process. Some of these are presented below:
a. PPA policy is restricted only to projects of 5 MW capacity and below. There is no PPA policy for projects above 5 MW;
Hydropower projects are governed by Environmental Protection Act – 1991 and Environmental Protection Regulation – 1993 during their implementation. Projects under 1 MW are not subjected to IEE/EIA, projects up to 5 MW come under IEE requirement and projects above 5 MW under EIA requirements. The process of IEE and specially EIA are time consuming and can last between 1.5 – 2 years. The main reasons for the delay can be attributed to the following reasons:
Large numbers of departments and ministries involved (DoED, MoWR, Ministry of Environment, Department of Forests, Department of National Parks and Watershed Conservation, Ministry of Forest),
Bureaucratic red tape and lack of mechanism to enforce time bound decisions
Lack of professional personnel within the line department / ministries;
While the delays in IEE and EIA processing are major bottlenecks in the hydropower development cycle a more serious bottleneck is the bureaucratic hurdles in acquiring government land on lease.
Although the pertinent policies, acts and regulations, make it crystal clear that GoN forest land will be made available for hydropower projects during the tenure of the generation license, the Ministry of Forests and its departments have either delayed or failed to provide forest land on lease to developers of hydropower projects. As a result at least 5 hydropower projects have become victims of this bureaucratic red tape resulting in delays or even cancellation of license. Four projects such as Langtang Project – 10 MW, Mailung Khola – 5 MW, Trishuli Project, Upper Trishuli – A have been delayed due to this reason. The license of Rasuwa – Bhotkoshi Project has been recently cancelled by GoN.
This prevailing negative mentality of officials of Ministry Of Forests and its departments regarding GoN land lease has to be eradicated immediately to make hydropower development possible in Nepal.
6. Financing Constraint
Hydropower financing by private developers in Nepal is undertaken with a mix of equity and bank loans generally in this ratio of 30 and 70 respectively. While equity financing is the responsibility of the project promoters the loan component is acquired from commercial banks with the developers PPA as guarantee.
Unfortunately the very conservative policies promulgated by Nepal Rastra Bank and the existing single obligor limitations imposed on financial institutions renders the loan financing by commercial banks to be very cumbersome and a large group of banks have to form a consortium to finance even small hydropower projects. Hence it is absolutely essential that NRB adopt progressive policies by declaring hydropower investment a priority sector investment. It is also important that project guarantee mechanism is implemented for bank loans to hydropower projects.
Many banks are hesitating to invest in hydropower projects in view of absence of in-house technical personnel capable of analyzing and monitoring hydropower related risks and advantages. Hence it is necessary that a technical unit be developed within the country to assist financial institutions in their bid to inject loans to hydropower projects.
7. One Window Policy
Although the GoN policies warrant the provision of a one window system for hydropower development, DoED, currently charged with this responsibility, is unable to discharge its obligations due to non-cooperation from other GoN agencies such as Ministry of Finance, Ministry of Forest, etc. This has resulted in harassment of developers in each and every step during the cycle of hydropower development.
8. Regulatory Agency
Although the Hydropower Policy 2001 envisages the creation of an energy regulating agency for the power sector (NERC) such as institution is yet to be formed.
The absence of such an agency has resulted in the following constraints:
· PPA terms generally not transparent and tilted towards the buyer;
· PPA processing procedures not time bound resulting in stagnation and delays to the detriment of the developers;
· General clauses and especially the Force Majeure clauses in PPA not realistic and totally in favor of the buyer;
· Revision of NEA tariffs overdue as the ETFC has now been disbanded;
· Revision of PPA rates for below 5 MW projects overdue as no escalation provided after 2003;
· Establishment of policies for PPA for projects of capacity above 5 MW overdue.
9. Security Arrangement
Under current conditions the developer has to pay a heavy price for the project security. The procedure of acquiring, transportation and use of explosives is extremely expensive as the developer has to pay substantially for deploying a large contingent of army personnel for these operations. This operation was especially difficult during the period of insurgency. With peace prevailing in the country the procedures for security should be streamlined so that the developer is not over taxed for security and blasting operations.
10. Social Problems
It is the policy of GoN to pass 1% of the royalty paid by a project to the DDC concerned. Despite such a provision the developers generally are harassed with demands of the local residents for providing various infrastructure in the area e.g. schools, drinking water schemes, roads, etc.
The period of insurgency in Nepal was especially difficult for hydropower developers as the parallel government sought to placate itself by seeking financial and other rewards from the developer just to keep the project active. There have been many instances of project obstructions or even closures due to the interference of the parallel local governments existing during the period of insurgency.
With the advent of peace in the country it is hoped that the above negative aspects will be corrected. It is important, however, that GoN amend the local self Governance Act 1991 so that the hydropower developers do not become victims of dual taxation both at the center and at the village level.
11. Technical Support to Developers
Implementation of hydropower projects requires the availability of expertise in various fields during each step in the implementation cycle. Small hydropower developers do not possess the required skills and expertise and hence have to resort to services of expensive consultants. Institutions such as Winrock International and Small Hydropower Promotion Project/GTZ have been providing some assistance in this sphere. However these services are not sufficient.
Likewise opportunities of skill upgrading within private developers is also an essential aspect in project management. Unfortunately donor agencies tend to provide such opportunities only to the government officials. The attitude among the donor agencies should change to allow private developers an equal footing for opportunities of training and skill upgrading of professionals in the private sector.
12. Conclusions and Recommendations
The above discussions point to the difficulties that developers in Nepal face in their mission for hydropower development. Based on the discussions, the following are the conclusions and recommendations that come to the fore:
1. Create a high powered umbrella organization (within PMO) to correct current drawbacks:
· Implementing the one window policy
· Implementing the holistic basin wise development concept
· Reconciling the current conflicts in Acts / Regulations
· Preventing haphazard promulgation of policy/fiscal directives detrimental to hydropower development
· Enforcing time bound decisions in matters related to licensing, IEE, EIA, PPA, Customs facilities, security arrangements, GoN land lease to projects;
Thursday, August 14, 2008
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.
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.
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.
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