Mirage of Illusionary Benefit of Rs 45 Billion from Pancheshwar Project

(Courtesy: Ratna Sansar Shrestha)

Having had some misgiving about the fancy amounts by which Nepal is supposed to be benefited by implementing Pancheshwar Project, I have conducted an analysis of these amounts and I am both amazed and stupefied that people dare to churn/dish out such numbers and there are people, too who believe in such illusionary numbers. Nepal is, reportedly, to be benefited to the tune of Rs 45 billion 870 million from electricity by building it in conjunction with Purnagiri. Similarly, if the re-regulating dam is built at Rupaligarh, instead, then the benefit is supposed to be Rs 34 billion 500 million. Moreover, Nepal’s benefit from carbon trading is supposed to be Rs 4 billion 420 million. Furthermore, the benefits from fishery and irrigation are supposed to amount to Rs 16 billion and Rs 5.69 billion respectively.

Justifying his intention to take up matters related to this in his imminent trip to India, Prime Minister Nepal, too, has parroted the amount of Rs 45 billion over and over and so has the energy minister. These numbers have been repeated so many times by the media ad nauseaum that people, unfortunately, seemingly have started to believe. Even a person like Dr Ram Sharan Mahat is reported to have opined that it will be unfortunate if the project does not get built, citing the same numbers. Therefore, I am trying to find out who is responsible for these bunkum numbers. You want to know why? Simply because, in my considered opinion, that person is either thoroughly incompetent or s/he has done so with some malafide intention, eventually designed to have Nepal and people of Nepal taken for a ride, which is not a new phenomenon (there are precedents set by Koshi through Tanakpur Treaties and agreements for West Seti through Arun III projects).

Revenue from Royalties
People are already talking as if Nepal will be benefited by monies in these amounts by simply having the project built. The only money Nepal stands to receive as such after getting the project built is from royalties; capacity royalty at the rate of Rs 100 per kW and energy royalty of 2% under current Nepal law. From Nepal’s 50% share of Pancheshwar and Rupaligarh (capacity 3,360 MW, generating 6,161 GWh), Nepal will become entitled to the total royalty of Rs 793.5 million (not even one billion and very far from reported Rs 34.5 billion!) if the energy is sold at US 4.95 ¢/kWh - the rate at which West Seti is set to export energy to India.

If the re-regulating dam is built at Purnagiri, Nepal’s 50% share will be 3,740 MW generating 8,192 GWh and the total royalty from this project will amount to Rs 982 million only (tantalizingly close to a billion!); not Rs 45 billion, though. The person coming up with these bunkum number (fantastic ones at that!) has used Rs 5.60/kWh as the sale price of electricity which is higher by 50% compared to the rate I have used. However, I have a justification for doing so. As the cost of generation is, reportedly, Rs 2.62, the bulk rate for domestic consumption should not include a mark up of more than 40%. Similarly, if the electricity is to be exported, there is no possibility of India agreeing to pay more than west seti rate.

To conclude, these amounts (Rs 45.87 billion or Rs 34.5 billion) is high by a magnitude and our PM and energy minister and their ilk are getting excited for no reason simply because a misguided person (or an incompetent one) has come up with these illusionary numbers. I request your active help in rectifying the wrong impression caused as such, if at all possible.

Return on Investment
It is also possible that the reference to these numbers could have been made from the perspective of return on investment. I have analyzed this aspect too. I have come to learn that it will cost $ 2,980 million for Pancheshwar and Rupaligarh combination. In that case Nepal will have to invest $ 372 million in equity and raise a debt of $ 1,117.5 million to mobilize her share of the initial investment amounting to $ 1,490 million. At the reported rate of return on investment of 25% Nepal will earn Rs 6.98 billion only. It needs to be remembered that to earn such return one doesn’t need to sign unequal treaty like Mahakali Treaty and also invest. Businessmen in Nepal are known to earn return on investment at rates higher than this in certain ventures. Besides, Norwegians and Americans (who have since divested) have invested in hydropower in Nepal are earning at rates higher than this. Nepali investors have invested both in Nepal and India to earn similar returns. Therefore, if the hype being created was in the form of return on investment then it is completely misplaced on two counts. One, the numbers thrown around are high by a magnitude and getting a return on investment at such rates is normal and natural phenomenon; there is no need for banner headline and surrender other vital interests of Nepal (I will refer to one of these below).

Moreover, you will recall that Nepal is about to borrow $ 45 million from ADB to invest in west seti project and, from it one can easily infer that Nepal will not be able to spare $ 372 million (equivalent to Rs 28 billion) to invest in equity of this project. If Nepal has to borrow to invest in equity (besides having to borrow the debt part of $ 1,117.5 million) as such then instead of earning a return Nepal will become entangled in a debt trap. I don’t even feel like analyzing its impact.

Benefit from Carbon Revenue
As mentioned above, it was also reported that Nepal could earn Rs 4.24 billion from carbon revenue. I have two comments with regard to this, too. One, if the electricity is used in Nepal, there won’t be any carbon offset, thus precluding the prospect of revenue from carbon trading. Conversely, carbon trading could become a reality if Nepal’s share is exported, thus depriving people of far western development region from the much needed electricity. Even on this tangent the potential for Nepal receiving such an amount is very remote as the carbon offset takes place in India and, unlike some people in Nepal, Indians would never be willing to surrender something that they are entitled to. They would have been forced to cede the right to this source of revenue if something was stipulated in the Mahakali Treaty in this respect. But, unfortunately, the treaty is silent with regard to India having to sacrifice such revenue stream in favor of Nepal. Had clear stipulation been made about it in the Treaty then India would have been forced to divert it to Nepal. So the talk about Nepal benefiting from carbon revenue too is misleading. From the way things are going on now, I am starting to believe that all these rumor mongering were designed to make fools out of politicos, bureaucrats and people of Nepal.

Irrigation Benefit
I am certain that the reported irrigation benefit of Rs 5.69 too is dubious. However, I don’t wish to my invest time in analyzing this number as this benefit, if it were to occur, Nepal is entitled to every paisa of it. But I would like to draw your attention to what Nepal stands to lose.

At the time of signing this treaty people were assured of 50% water from this river, deemed to be a boundary river against the spirit of Sugauli Treaty of 1816. Even the Sankalpa Prastav passed by the joint session of the parliament reiterated that Nepal is entitled to 50% water. However, unfortunately, after implementation of this project only 93,000 hectare of land will be irrigated in Nepal and 1.6 million hectares in India; a clear case of breach of the principle of 50%. It has come to my knowledge that Nepal will have to sacrifice 86.5 km2 of its land to build the reservoir; amounting to 43% (57% submergence is supposed to happen in India). From this perspective, Nepal is entitled to irrigation of 43% land not just 5.49%. In view of this India needs recompense for 37.54% irrigation facility that India uses in addition to the share she is entitled to. If it is to be monetized at the rate South Africa is paying Lesotho, Nepal deserves Rs 15.17 billion per annum. However, to my dismay, nobody is talking about this issue and looks like the corrupt politicos and bureaucrats of Nepal are happy to surrender this right while chasing the mirage of Rs 45 billion.

Anti-development
Misguided people who fail to comprehend these important issues brand people like yours truly anti development. People like me are simply trying to ensure that Nepal is not short changed out of what she is legitimately entitled to. I am sure that the readers too wish the same for our motherland.

Sharing Water Resources

(Courtesy: Ratna Sansar Shrestha)

Water resources will be the next contentious issue in a federal Nepal

Nepal’s forests are no longer a natural resource to be tapped for development, water is.

Only 12 per cent of Nepal’s 4 million hectares of arable land is irrigated, that too mostly during the rainy season. Most of the rivers are snow-fed, so if we construct reservoir and canal network, we can irrigate land in the hills and Tarai all year round. Farms can have three, even four harvests, a year. There is no need for Nepal to be food-deficit.

Water resource has multi-dimensional utilization (irrigation, drinking, transportation, and tourism, industrial) and, therefore, it shouldn’t just be understood as a source of energy. We can earn more from rafting based tourism than generating hydroelectricity from the Bhote Kosi, for instance. Kosi, Gandaki, Karnali including Bagmati can be used as waterways, the cheapest means of transport.

Nepali leaders often talk about the country’s hydropower potential, and dream of exporting it to India. Even if hydro-electricity is generated, its most productive use would be domestic, to power industries and generate employment locally. By exporting raw power to India, we can earn some cash in the form of royalties of under 3 percent which will not help domestic economic growth.

In a federal system, there is a bigger chance that federal units will independently negotiate to export power to India. Electricity rich provinces can sell power to those who pay the most. Most of the Nepal’s hydro-energy sites are in the mid-west, which generate over 300 MW but only half of it is consumed in the region.

At present, the central development region generates over 250 MW, of which almost all power is consumed here. But the eastern region generates only 14 MW but this is the region which consumes the highest amount of power. The mid west will export to the eastern region only if it is ready to pay the amount it demands or else it will export to India for better price.

Melamchi is in future Tamsaling province. If the Newa province wants to bring Melamchi water, it should be ready to pay the price Tamsling demands. Kathmanduites who are paying Rs 50 per month for water, will have to pay a lot more as the price of water. If Newa fails to pay the price, Tamsaling is free to sell it to whichever province pays the price.

Nepal Mandala has no potential for hydro electricity. If it is
declared a separate province, either people will have to live in the
dark or import the power at a high price.

For energy and regulated water, we need to build reservoirs on our rivers, which will inundate land in the fertile valleys. The upper riparian province will therefore be deprived of using the water, and the lower riparian will benefit. A federal Nepal will face the same issues we now currently face vis-à-vis India about river basin development. How will it be possible to irrigate Jhapa without submerging valleys in the Limbuwan province?

When two provinces compete, a third province can benefit, and these disputes can weaken the nation. Decision on water resources should therefore not be devolved to the provincial units but be the prerogative of the centre, like foreign policy and defense.

But the proposed ethnic-based provinces will not accept this idea. Nepal has already signed the ILO Convention 169, which allows control of the indigenous communities over the natural resources. In other words, this convention goes against the argument that there should be central jurisdiction over water resources.

The bottom line is that a federal system will not be conducive to Nepal’s national interest with regards to sharing benefits from water resources, and it will affect our development process.

This opinion piece is a translated adaptation of the original printed in NAGARIK on AUGUST 9, 2009 and published in Nepali Times of 14-20 August 2009 (#464)

READING THE CODE: Maoist Plans for the Revolution

(Courtesy: Dr. Thomas A. Marks)

A political risk consultant in Honolulu, Hawaii, Dr. Marks recently authored the entry, “Maoism in South and Southeast Asia,” in the Oxford Encyclopedia of the Modern World (1750-Present); Peter M. Stearns, ed. (New York: Oxford University Press, March 2008).

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Since their loss of the government in May of this year, the Maoists have threatened almost daily to launch another round of street violence if their demands are not met. They now have made good on those threats, building upon their continued use of terrorism beneath the surface to launch an open round of struggle designed to bring down the government. Put in the words of Prachanda (as per Republica): “The Maoist CC meeting decided to hit the streets for the sake of ‘civilian supremacy’ a Maoist-led national unity government, national independence, a new constitution, and the peace process.”

That statement says it all. One might wonder: What if the present political line-up continues to vote, as it has, for another, non-Maoist party to lead the government? Or to carry on as if Nepal indeed is independent, is involved in a peace process, and is writing a constitution, with only the Maoists determined to keep all of those things from being realities? “We don’t want to go back to the jungle as the regressive forces have wished,” answers Prachanda gravely.

The problem is that “back to the jungle” has never been the plan. Just what the Maoists are up to has been stated time and again, most recently by Central Committee member (and Mrs. Bhattarai), Hisila Yami, in a op-ed published by Kantipur located at the following URL: http://www.kantipuronline.com/kolnews.php?&nid=208193.

Maoist Game Plan

The article contains the Maoist "game plan," spelled out very clearly. Maoists speak openly but in a language which utilizes "code." All one must do is decode, and the course of action appears. In fact, the same terminology can be found by perusing the pronouncements of any of the Maoist movements which have left their bloody fingerprints on the post-World War II pages of history.

Particularly interesting, though, is the striking similarity between the Nepali Maoist formulations and those of their Philippine counterparts. Though one might suspect plagiarism, the reality is simply that the ultimate sources are the same if one is using Maoist texts. They draw upon an eclectic group for inspiration but overwhelmingly Lenin and Stalin.

What unfolds in Ms. Yami’s discussion is the contents of the recent Maoist leadership debate on how to proceed. It's an old debate when it comes to Maoist insurgency: Do you mine beneath the opposition's castle, ultimately bringing it down with a charge from below? Or do you charge the gates, because you know the enemy within is weak and of limited will to resist?

Ms. Yami -- speaking for her husband's (and presumably Prachanda’s) faction -- recognizes that attempting to seize power now through overt mechanisms (“back to the jungle”) will certainly result in disaster -- and probably Indian invasion. Consequently, what she advocates is the classic "tunnel under them" or united front approach. The "new democratic republic" she mentions is the normal Maoist vehicle for doing this.

"A new democratic republic" sounds innocuous, but it is "Maoist" for a united front government. This is a government of like-minded forces brought together to oppose particular issues but later discarded when it is time to "move on." Such an approach was called "salami tactics" (from slicing the salami) in the 1960s and was used by the Soviets in Eastern Europe and, of course, the Maoists everywhere.

The tactic is simple: you get “useful idiots” to throw in with you to support tactical issues, such as "civilian supremacy." Who would be opposed to that? But the point is to use the issue to neutralize a particular foe, to achieve a particular end. The army, for instance, as has been demonstrated, remains the last real obstacle to the Maoists’ being able to do whatever they want. Neither the police nor the Armed Police will oppose them. They will simply fall in line, particularly because their leadership will be replaced with people who favor the Maoists. Thus, the need of the moment is to use the lofty goal to rally a coalition capable of neutralizing the army.

Once the particular issue at hand has been achieved, however, a new "crisis" issue will emerge. Then, the Maoists will seek to isolate the new foe – with the “issue” often explicitly invented to place that foe in its precarious position. The “Maoist discussion before this discussion” – on which foe was primary – centered around just this issue. At the time, Nepali Congress (NC) was seen as the key obstacle (in cahoots with the army, to be sure), because the UML was playing the “useful idiot” role.

Turns the worm, the UML has thrown sand in the gears, siding with both NC and the nefarious “still RNA at heart” (as the Maoists see it, especially in their not-so-secret conclaves).

What must be done, then, is to form the new coalition – their “Maoist-led national unity government” – to isolate and eliminate NC, UML, and NA. Gradually, by splitting, splitting, and splitting ("slicing the salami"), they will eliminate their rivals until the only people left are Maoists. Nobel Prize-winning author, the late Aleksandr I. Solzhenitsyn, lays this out exactly in his famous work, Lenin in Zurich (1975).

A Republic is Not a Republic

A "people's federal democratic republic" (see Ms. Yami’s text) is but an interim step to the "new democratic republic" and the eventual "people's republic." Ms. Yami has spelled it out clearly: the need at present is to mobilize "anti-feudal" and "anti-imperialist" forces (feudal forces are those who favor parliamentary democracy and the market; imperialists are, in pride of evil place, the Americans and their friends, especially the dastardly Indians). How to mobilize these forces? By giving them the Maoist version of "federalism," a passing out of linguistic, ethnic, and economic goodies which exist in theory but will prove disastrous in fact. Long before realization is reached, the Maoists will have moved on and consolidated complete power.

Ironically, since the technique always works when faced with the sort of handicapped thinking one encounters in a particular slice of Nepal's chattering classes, what Ms. Yami is so angry about is the hard-core Maoists within her own party, those who want to "go for it." This is the group that challenges Prachanda and wants to use concerted street violence and assassination to sweep away the opposition.

A version of this is in play. The killing and the threats are daily reported in Nepali media. The unsavory actions of the Maoists at the Balaju Industrial Area are ample testimony to the manner in which violence has been woven into the warp and woof of every action undertaken by the “CPN(M)” (whatever its new name, it remains the same crew). So, too, do numbers of Nepali politicians bear witness to the actions of left wing fascism as they flee the country to escape the kukris, beatings, and kidnappings of the YCL storm troopers (yes, they’ve reflagged – name changes are meaningless).

And such sub-rosa violence is working. Yet, for the hard-core, none of this has given the Party power. The army remains intact and will fight; and India -- and even the most feckless and fickle of the foreign presence – seem willing to support the present government. Ultimately, though, it's an Indian show, and the Bhattarai faction is well aware that an IPKF would end the Maoists. They are not LTTE.

Faced with such a situation, Ms. Yami is surely correct that the proper course is to walk softly and carry a big kukri. Unfortunately, to keep the factions aligned, Prachanda has agreed to go to the well one more time, to once again threaten and bluster in the expectation that capitulation will result.

The Future

How well Prachanda has calculated will determine the future of Nepal. By now, a sizable portion of the public is wise to the Maoist strategy. It is unlikely he could field the same lineup as he so often threatens for a Janaandolan III. Nevertheless, he has mobilized the lumpens and the clueless in sufficient numbers to make a go of it.

By “discuss civilian supremacy,” Prachanda is not advancing the plain English meaning of the phrase. What he and the Maoists mean is this: if the government will once again give in, declare that only the prime minister can hire and fire, all will be well.

And it will be – for the Maoists. They will provoke the next round of crisis, put together the united front necessary to resume government leadership, then use that position to eliminate their few remaining foes. Dictatorship, when it comes, will be implemented in the name of “rule of law.”

Lenin in State and Revolution (p.73) put it bluntly: “…[T]heir resistance must be broken by force; it is clear that where there is suppression there is also violence, there is no liberty, no democracy.”

Thesis, antithesis and synthesis (By Hisila Yami)

Defining a Soft Coup

(Courtesy: Bidushi Dhungel and Siddhartha Thapa)

The peace process in Nepal is approaching a deadlock and the contentious issue is the disagreement between political parties and the former rebels, the Maoist party regarding the tussle over the control of state institutions. The mainstream political parties have endured a constitutional democratic culture where state institutions remain independent of political pressure through checks and balances and the separation of power. However, the Maoists a party have expressed time and again its commitment to establish a people’s republic; a system which contravenes the very structure of a liberal democracy. The state institution that has repeatedly become a topic of debate at a local and political level is the national army- the Nepal Army.

The Nepal army has a long history; it is one of the oldest institutions in South Asia, whereas the PLA has a very infant one. The distinction is as such; the PLA was created by a single radical movement in the span of less than two decades. Their origin can be traced to one single objective which is to fight against and defy the Nepali nation state for the simple purpose of propelling the Maoist ideology. On the other hand, since its inception, the Nepal army has been the lifeline of Nepal’s sovereignty from Prithvi Narayan Shah to Bhimsen Thapa through to Jung Bahadur and into the Shah Dynasty. Until the mid twentieth century, the army played a crucial role in the day to day activities of the state. This was true across continents. What is also true is the fact that the Nepalese army has always been loyal to the political authority of the time. For example, with the political demise of Bhimsen Thapa and Amar Singh Thapa, there was speculation that there would be large scale discontent. However, the army sustained its composure and supported the government of the time. Similarly, as the Rana rule came to an end, the army subsequently took allegiance with the reigning monarch. The Economist, in a publication soon after the April revolution of 2006 described how the army had played a crucial role in convincing the king to hand back power to the political parties. Thus, history has now repeated itself and today we see the army closely aligned with the democratic forces and the government of the day.

There is rife speculation that the Nepal army is staunchly anti- loktantra. If so, such apprehensions need to be justified. Since the signing of the comprehensive peace agreement, the army has not once defied the rules that define the peace process. On the contrary, there have been consistent incidents where one or more PLA members have been solely responsible for the death of political adversaries, journalists and the common people who have simply dared to contest Maoist beliefs. The Maoists today have described the process of integration of the two armies as the core issue on which the future of the peace process hangs. But one must understand the difference between the Nepal army and the former rebels. For example, let’s examine the training received by PLA and the national army. While the national army has multiple functions- maintaining territorial integrity, alongside defending the sovereignty of the country, the PLA has a unilinear function- to revolt against the state and to organise the state within the paradigms of a communist paradise. This immediately begs one to ask how an armed group designed to revolt against the state can be loyal to that very state.

The integration of ideologically indoctrinated guerrilla fighters into the national army is bound to trigger political instability. In the long run, these indoctrinated and dogmatic guerrilla fighters will pollute and influence the thoughts of the common soldier of the Nepali army. The implications of such a move would be profound. The National army would no longer be apolitical and the democratic system of checks and balances will erode as one party will hold power over the vast national army. In essence, the integration of these radicalised fighters would serve the purpose of a soft coup staged by the leaders of these very fighters.

What we often overlook is that victory is still to be seen. The Maoists have gotten thus far through a process of negotiations and power sharing agreements. Had they won a military victory, it would be their right to do as they please. However, as their victory has not been a military one, the 12 Point Agreement and subsequent agreements have bound them within the constraints of a democratic polity. Credit must be given to the Maoists for their decision to engage with other political parties and the common people so far. But the intention of the Maoist party has created a realm of doubt through the utterances of their party leaders who have consistently harped on the idea of eliminating their adversaries in order to achieve their long term goal of establishing a people’s republic. Today, rather than the consolidation of democratic ideals and values, the Maoist party seems to be engrossed in the process of exploiting the weaknesses of other political parties and vital state institutions. This can be manifested by their eventual demand of integrating their fighters into the national army as the political parties began to lose their edge.

The conclusion of the constituent assembly elections and the catapulting of the Maoist party into forefront of national politics as the largest political party have dramatically altered the political equation of the country. In fact, the election victory has bolstered the enthusiasm of the Maoist party to push for complete consolidation of power. However, the Nepalese army (the only other organised armed force that can challenge them) remains the only prominent hurdle to their destination of a people’s republic. The political parties have long been out manoeuvred and as a result, the Maoists have understood that the political parties are no match for them. Therefore, the neutralisation of the Nepal army is a strategic necessity for the Maoists to attain total power.

The episode that triggered the divergence between the Nepal army and the Maoists has been much scrutinised. At the heart of this conflict lies the debate regarding the actions of the army chief, the president and that of the Maoist party. First, the army chief’s bold move to defy the prime minister’s demand for his resignation prevented the collapse of the very structure of the Nepal army. Second, in an abnormal situation as was then the president’s apt intervention saved the country from serious political breakdown and crisis. Third, the army chief resignation row coupled with the release of the Prachanda video has completely exposed the Maoists. The consequences of this were so great that they had to leave government and have had to lie low as a result.

The future discourse of Nepali politics remains extremely fragile. This is because while the present government has enough members to form a government it doesn’t possess the numbers required to draft and implement a new constitution. It is this number game that has become the new mantra of the Maoist party to overwhelm the state. The Maoists now are engaging in talks with the two other major political parties (NC and UML) for the integration of their fighters into the national army. In such informal talks, the Maoists have been reported to be appeasing both the UML and the NC into fanciful power-sharing agreements like that of the past. Concurrently, the Maoists are also making it clear that without them the constitution will not be drafted on time as planned. Their demand: the integration of ideological fighters into the national army. You decide.