HYDROPOWER DEVELOPMENT IN NEPAL - THE DEVELOPERS' DILEMMA

(Courtesy: Er. Bijaya Man Sherchan)

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.

While the above chart gives the impression of a heavy demand of hydropower licenses, the licenses have mostly failed to materialize into concrete projects. According to information available in the DoED website, GoN has recently either cancelled or failed to renew 11 licenses of total 177.6 MW capacity. These include Lower Balephi (5 MW), Kolpha Khola (2.23 MW), Madhkyu Khola (5 MW), Upallo Khimti (4.5 MW), Tamor Mewa (101 MW), Thapa Khola (2.34 MW), Lower Phame Khola (2.2 MW), Small Likhu Khola (1.5 MW), Rasuwa - Bhotekoshi (22.6 MW), Khimti-2 (27 MW), Daraudi Khola (5 MW).

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;

b. The process of PPA lacks transparency. Chilime project has been awarded extraordinary energy purchase rates at par with that provided to Khimti & Bhote Koshi projects (Vide Table 5 below). In addition Chilime has been provided annual escalation in rates @ 8% p.a. for a period of 12 years in contrast to the 6% p.a. escalation provided to IPPs for a period of 5 years and that too only till 2003;

c. The general clauses in the PPA agreement and especially the Force Majeure clause is non-standard and largely to the benefit of NEA and detrimental to the interests of the developer;

d. The PPA procedure is not time bound. A developer has to wait for months or even years for the conclusion of the PPA process;

e. NEA has no funds for reinforcing transmission capacity in different sectors in the country. As such it has formally declared at least 6 corridors as fully overloaded corridors where PPAs cannot be signed with IPPs. These include - Sunkoshi Corridor, Mechi Corridor, Dharan – Dhankuta - Tirtire Corridor, Trisuli - Chilime Corridor, Pokhara – Myangdi - Tatopani Corridor and Lamjung Corridor;

f. The PPA rates established in 1998 have been frozen as of 2003 at the level of Rs 3.90 per kWh for wet season and Rs 5.52 per kWh for dry season. Due to the huge escalation in prices of fuel and construction materials during the last few years the available rates are no longer feasible for developers wishing to construct plants now;

g. The policy of Q65 adopted by NEA is not to the benefit of the developers as it results in underutilization of resources and high cost of energy generation.

5. Environmental Constraints

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;

2. Implement the concept of holistic basin wise development of hydropower including project infrastructure (i.e. transmission lines and access roads);

3. Create an autonomous organization for planning and operation of national and regional transmission grids to facilitate wheeling of energy; implement one trunk east-west corridor and at least 5 north-south corridors of transmission lines

4. Correct current Acts/Regulations to correct the incentive levels to developers. HPP-1992 and related acts/regulations to be the basis of tax and other incentives;

5. Waive IEE/EIA for hydropower projects of up to 10 MW;

6. Provide to NEA the tariff escalation long overdue due to absence of ETFC

7. PPA should come under regulation of regulatory authority. Creation of NERC should be expedited;

8. Improve PPA procedure to render it to be transparent and procedures time bound;

9. Current PPA energy rates should be revised to reflect construction cost levels prevailing. IPPAN has proposed 2008 PPA energy level at Rs. 5.55 per kwh with 5 years escalation @ 6% and next 5 years escalation @ 4%. Price level reduced to Rs. 4.94 if VAT waived completely;

10. Eliminate duplication of taxes and royalties to local bodies under Self Governance Act 2055;

11. Small hydropower to be compensated for investments on transmission lines and access roads;

12. Security to be provided for projects at nominal costs;

13. GON should devise a policy of providing compensation to projects whose IEE/EIA have been approved but delays have occurred due to PPA and land lease procedures. Compensation should also be provided to developers if licenses/PPA have been terminated for these reasons;

14. NRB should amend its policies to render hydropower sector to be priority sector with preferential treatment in terms of interest rates, pay-back periods etc.;

15. NRB to create environment for incremental domestic capital market and foreign capital for hydropower development;

16. Create opportunities and conditions for enhancing the technical and management capabilities related to hydropower in banks and also in private developers;

17. Strive to achieve a conducive environment so that private developers with the support of local financing institutions are able to add 70-100 MW generation capacity to national grid annually and thus assist in eradicating load shedding.

(Mr. B. M. Sherchan is a Mechanical Engineer, Management Consultant, Hydropower Developer and an Executive Board Member of Small Hydropower Developers Association-Nepal - SHDAN)

Basics of Nepali Hydro-Diplomacy

(Courtesy: Dipak Gyawali)

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

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

Essentials of Diplomacy

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

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

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

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

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

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

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

Distilling Water Essentials

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

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

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

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

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

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

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

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

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

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

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

Re-Tooling Munshikhana

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

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

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

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

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

References:

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

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

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

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

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

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

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

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

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

The Other Side of SSR (Security Sector Reform) - What Nepal's Mainstream Media Neglects Informing the Public About

(Courtesy: el Commandante)

Recently, Nepal's mainstream media has been rife with opinions on how Security Sector Reform (SSR) should be handled. From so-called international experts on the UNMIN's payroll to child welfare specialists turned expert on security issues, everyone appears to have unsolicited "two cents" to add.

This writing although unsolicited, is factual and grounded in events as they occurred rather than on biased accounts that serve vested interests. In essence, this is not another attempt at re-writing history to get foreign aid dollars for Nepal - it is a targeted account, designed to ensure the dollars that Nepal does receive, reaches destinations where reforms are most urgent.

What most (if not all) of the recent SSR related analyses share is the following theme: "Nepal's security apparatus - especially the Army - needs to be more transparent and more democratic." Having read, re-read and disdainfully digested the words of such internationally esteemed wise-men, below is a slightly more balanced take on the sequence of fixing that really needs to happen.

Nepal's Model Extended to India's Insurgencies - Let's hope the same model doesn't unfold in India!

Before embarking on a point-by-point critique, let us do away with the most ridiculous logic ever to have been aired; that somehow, Nepal's "democratic mainstreaming" of its Maoists will encourage similar insurgent outfits in India to follow suit.

Such logic is retarded for so many reasons but for the sake of this writing, let's focus on the obvious lesson that India's Naxalites have taken from Nepal - that a gratuitous war of attrition using a combination of political, military, ethnic and human rights agendas can ultimately bring a fledgling democracy to its knees.

If Nepal was to really serve as an example for radical Indian leftists to democratize, why hasn't Sitaram Yechuri vocally opposed calls for the Indian Air Force to join the fight against the Naxalites? Perhaps the idea is for the Indian Government to learn from Nepal's mistakes. This would certainly explain why India has continued to train and arm civilian self-defense units to fight their Naxalites while Nepal's attempt at raising "Village Defense Forces" was shut down on humanitarian grounds.

It is not conjecture, but fact, that the idea of "Village Defense Forces" in Nepal would have been a straight up application of "Maoist tactics 101," on the Maoists. They knew it, understood the ramifications, and mobilized known sympathizers like Mr. Padma Ratna Tuladhar to derail the Nepali government's initiative.

Based on historical facts, it is extremely likely that the Nepali government's idea was opposed for the right humanitarian reasons. But the point being highlighted here is not so much the opposition but rather, the double standards that were applied to Nepal versus India - even though the standards were based on the same humanitarian principles.

With this example in mind, let us proceed to take a dispassionate view of the subjects that need to be considered, when speaking of SSR - the Nepalese Army, Political Will/Capacity, and the Integration of Maoist Combatants.

A. The Nepalese Army

A favorite criticism of the Nepalese Army is that it is unprofessional. But by what standards?

By military standards (in the context of Nepal's resources constraints) the Nepalese Army is a professional institution with a hierarchy that consists of officers trained in the best military institutions around the world. They are exposed to and experienced in UN peacekeeping operations and are battle-hardened through participation in a counter-insurgency campaign at home.

The military's chain of command is established through integral institutional mechanisms and procedures that accurately assess character, competence and professional knowledge through annual reviews. Documented feedback on the progression of each officer is subject to appraisals by two senior reviewing officers. Such appraisals are independent reviews of junior officers' assessments and are designed to drive accountability and professional integrity. Promotions are awarded based on competence and institutional judgment with nepotism and favoritism minimized to the extent humanly possible (if not eliminated).

So what's unprofessional about the Nepalese Army that isn't about all the other Armies around the world? What institution in Nepal is more professional than the Nepalese Army? If 100% efficienciency, transparency and immaculate accountability are the standards that the Nepalese Army is being measured against, perhaps those pointing fingers at the Army should get their own houses in order first?

Another criticism of the Nepalese armed forces is that they are undemocratic. Once again, "by whose standards?"

With historical precedent as a yardstick, the Nepalese Army has always remained loyal to the legitimate powerbase as enshrined in the constitution of the day. In fact, the Nepalese Army's training and operational doctrines include detailed accounts of when aid to civilian authorities is deemed appropriate; the same doctrines intentionally (and strictly) exclude any policies or guidance on administrative procedures to be executed under martial law.

So what exactly is undemocratic about the Nepalese Army? Is Nepal's Army undemocratic for having fought the Maoists on the orders of a democratically elected government? Is the Nepali Army undemocratic because it failed to mutiny under the de-throned King's undemocratic (yet constitutionally driven) orders? Then why wasn't the King prosecuted and why does all the blame rest on the Nepalese Army's shoulders? Or truly, is the Nepali Army undemocratic because it refused to go to war with the Maoists on the whims of one man - Girija Prasad Koirala?

The only thing undemocratic about the Nepalese Army appears to be the one-sided abuse that this institution continually bears from individuals like Pushpa Kamal Dahal, Kanak Mani Dixit, Devendra Raj Pandey and the entire lot of international organizations whose budgets depend on the availability of "soft targets" like the Nepalese Army.

Further, the Nepalese Army's financial policies and procedures are transparent and have always been subject to scrutiny by the Auditor General. Yet, the Army is accused of unprecedented levels of corruption and graft. If such practices exist, why hasn't the Auditor General executed independent audits of the Army's spending? The AG is certainly empowered to conduct such audits and yet, no evidence of action exists. Assuming that allegations of the Army's corrupt ways are accurate, the question that begs being asked is at what level the corruption occurs and where the funds end up? The answer to this question may explain the "lame duck" status of the Auditor General which is hardly the Army's fault alone.

The Nepali Army is also alleged to be an exclusive State organ. Yet, no rules, regulations or practices are widely prevalent that thwart inclusiveness. It is true that quality and merit are not compromised during recruitment. And these standards are maintained with professionalism in mind - they are not enforced to decrease inclusiveness.

If the argument of exclusion is based on the disproportion representation of Nepal's southern ethnicities in the Nepalese Army, then the question that need be asked is why the British and especially the Indian Gurkhas recruit exclusively from Nepal's hilly regions? At least the Nepalese Army has recruitment depots in Nepal's southern belt. And it is not the Nepali Army's policy to force recruitment from any part of Nepal - the process is voluntary. So on what basis is the Nepalese Army's recruiting processes, exclusionary?

Further, the Nepalese Army is the only national institution that has always remained satisfactorily functional. It remains steadfastly dedicated to the protection of national integrity and cohesion. It mirrors Nepalese society. And, it was instrumental in safeguarding the nation from being declared a failed state.

The Nepalese Army has consistently dedicated itself to the protection of the Nepali people, and at times, has operated in complete isolation to prohibit the Maoist insurgents from a achieving a military takeover. It still remains a credible, robust and capable force as well as a bastion against illegitimate and undemocratic adventurism. This is precisely why neutralizing or demoralizing the Nepalese Army will always remain a focal point of advocacy for vested interest groups, bent of dismantling an institution they wish to mirror in their own image of "free for all" chaos, lawlessness, and instability.

B. Political Will / (In) Capacity

The erstwhile constitution of 1990 had delegated all authority over the Army to the Legislative and Executive branches of government. It was a democratically elected Prime Minister of the Nepali Congress party, who introduced a legal provision (contradictory to the spirit of the constitution), that mandated Royal approval for military mobilization. Ironically, it was another Nepali Congress Prime Minister (and also the current caretaker PM of Nepal - Girija Prasad Koirala), who also resigned citing the Army's refusal to engage the Maoists - how could the Army go to war in the absence of broad political consensus?

Then, when the Army was finally mobilized to fight Nepal's insurgency, the same political leadership failed to prepare and execute an integrated national campaign plan; they failed to utilize the military as one of many instruments at the State's disposal. The Army was used (and abused) in isolation, devoid of a political aim and continually portrayed with inflated expectations as a "silver bullet" to Nepal's Maoist insurgency.

Such political farce continued well beyond the civil uprising of April 2006. Constituent Assembly Elections were held as a democratic exercise when the country's law and order situation was out of control. As a result, the Maoist party obtained 31 % support by employing widely documented acts of coercion and intimidation.

International observers (including the Carter Center), executed their mandate to observe election procedures at limited cites while in the vast majority of the countryside, intimidation persisted. The observers' essentially put on a stamp of legitimacy that was immediately called into question by almost every major political party candidate, who reported widespread Maoist coercion. The interim Finance Minister, Ram Saran Mahat, even sustained head injuries at the hands of Maoist henchmen, known as the Young Communist League (YCL).

Though the election results must now be fully respected, the ramifications of such futile democratic exercises will unfold and complicate the Nepalese security situation and political process more intensely in the future. A broader and more durable coalition of communist parties can never be fully ruled out because although the leaders of the UML and the fringe leftist parties sound vocally robust, the lower, younger echelons are fully sold on populist rhetoric, extremism and instant gratification derived from resorting to violence (to fulfill political demands).

Currently, the House consists of 69 % of the old political cadres (who remain completely beholden to external powers) and 31% of Maoist cadres (who are exceptionally well versed in modulating between nationalist and extreme leftist designs, as the situation demands).

The 69 % are near-oblivious to issues and procedures that pertain to national security (while technically, they exercise civilian supremacy and oversight over the Security Forces); the remaining 31% believe in establishing “Political Commissars” to command and control the uniformed services.

The Maoist leadership in the interim government are battle hardened and their political chain of command is intricately tied to their military arm. "Prachanda" is still the supreme commander of the Maoist military wing and Maoist commanders like Barsa Man Pun, Ram Bahadur Thapa, are integral components to the Maoists' political strategy. No other political party in Nepal enjoys the company of their own private, military wing even as they participate in open, democratic politics.

There should be absolutely no doubt that the Maoists committed to capturing total political power by any and all means available. While those who remain bent on reinterpreting historical lessons of appeasement wait for the Maoists to sober up, it is advisable for Nepal's political leadership to exercise precautions rather than rely on remedies.

The capacity of the civilian hierarchy – the so-called “Political Masters,” and the civilian bureaucrats of security–related echelons (e.g., the Ministries of Home and Defense), are neither functional nor knowledgeable about security affairs. Their handling of the various mutinies in the Police Force and the Armed Police Force are indicative of their collective incompetence. The Nepalese Army’s “no nonsense resolve” was instrumental in compelling the mutineers to surrender. That in the absence of the Nepalese Army, the government would have succumbed to the pressures of the mutineers is a forgone conclusion.

C. The Process of Re-Verified Maoist Combatant Integration

To fulfill their political aspirations, the Maoists intend to undertake the following measures:

• Neutralize the Nepalese Army which remains the last obstacle in their quest to establish power supremacy.
• Politicize the Judicial Branch and the Bureaucracy.
• Control the media and the Civil Society.
• Subvert the people and demand obedience through the display of public punishments.
• Continue to exploit the international community, the UN and the INGOs' good will.
• Capture and control the national economy through unions.
• Undermine non-Maoist political parties.
• Establish parallel governance mechanisms.
• Manipulate (leverage) previously declared commitments to continue extracting concessions from other parties.
  

The integration process should be conducted according to the following steps:

• Disperse the 12,000 non-verified combatants and reduce the cantonments, immediately.
• Maintain allowances, rations and accommodations for the 19,602 verified combatants.
• Establish vocational training facilities and adult education programs in the cantonments.
• Conduct de-doctrination processes in preparation for integration.
• Conduct re-verification to confirm and identify those Maoist combatants who want to willingly join the security forces. The rest should be provided vocational training to make them skilled laborers and provide them with job guarantees.
• Those who intend to join the Security Forces must fulfill existing pre-requisites, willingly volunteer to abide by the Military Law and de-link themselves from their parent political party and its activities.
• The creation of intact Maoist-only units, a Maoist chain of command and inclusion of politically active members, previous Security Forces deserters, and HR violators should not be permitted.
  

Conclusion

SSR and supreme civilian control of the Nepali State's Security Forces are certainly needed for a fully democratic nation to emerge as the new Nepal. But the process of democratization is as urgently needed for the political side of the equation as it is for the military side. One must learn to effectively exercise control over the other, without repeating the politicization that resulted with the Nepal Police, after the 1990 transition. This is clearly a two-way effort and simply heaping blame on the Nepalese Army and asking for it to democratize and undergo reforms, won't achieve the desired end.

The National Security Council and the Ministry of Defense must be educated to function independently but with knowledgeable and competent civilian manpower. It is absolutely vital to exercise civilian control in an evolutionary manner to avoid unnecessary frictions and animosities. As the apex of Nepal's security forces, the civilian hierarchy must equally inculcate transparency, accountability and inclusiveness into its own mechanisms.

One must clean one's own house first - only then does it make sense to point fingers in others' directions. The political hierarchy must be capable enough to plan, project, provide resources and punctually decide the course of action. Should this level of operational efficiency be achieved, criticisms of corruption and undemocratic practices within Nepal's security forces will automatically become moot points.

Essentially, SSR in Nepal's context cannot be the exclusive domain of any one institution. Rather, it must be planned and executed as a multi-intuitional, joint civilian-military exercise. There is not a single institution in Nepal that is not in need of reform - the Nepalese Army is the most convenient target because it happens to be the one stumbling-block that is preventing the Maoists from achieving political dominance.

No doubt, there are documented instances of grave mistakes that have been committed by security forces in the line of duty. The perpetrators of such abuses should be prosecuted to the law's extent. But the sideshow drama that depicts the Nepalese Army as a bunch of trigger-happy, war-mongering idiots, has to cease. For if the Nepalese Army is guilty of all the allegations heaped on it, then the political establishment that sent the Army to war is equally guilty for committing the Army to combat and then deserting the security forces midstream. The panacea to preventing human rights abuses is clear - DON'T GO TO WAR. Was it the Army that was begging to fight the Maoists or the elected government of the time that ordered to Army into action?

In a country where the largest party in the constituent assembly consists of a group that waged armed rebellion for over a decade, is the State's Security Forces the only organ that needs reform? Or is there a much larger problem that needs to be dealt with, concurrently?

The same apologists who want Nepal's Maoists to serve as role models to India's Naxalites will tell us that "peace is made in such ways." But so are tyrants and this is a thought that should feature prominently on the minds of SSR "subject matter experts," political pundits, and all international agencies that are busy advising Nepal on how to reform its security sector.

Related Posts:

The Utility of a Professional Nepalese Army
http://nepaliperspectives.blogspot.com/2007/07/utility-of-professional-nepalese-army.html

All Attention on the Army
http://nepaliperspectives.blogspot.com/2008/02/all-attention-on-army.html

The Nepali Army is a Favorite Target for Cheap Provocateurs - An Analysis of a Nepali Adolescent's Professional Obituary
http://nepaliperspectives.blogspot.com/2007/12/being-cheap-provocateur-is-easy.html

Nepal Just Lost Rs. 80 Billion

(Courtesy: Sujit Acharya)

The website of the Department of Electricity Development states that survey licenses for potential hydro projects totaling more than 40,000 MW in capacity are being processed, and that the average fee to be paid to the department is Rs. 10,000 per MW. This translates into approximately Rs 400 million in license fees. Most of the companies that have applied for licenses are either Indian or Nepali with low or no financial and technical capacity to develop these projects.

The reason why many Indian companies have applied is because the license fee is extremely low in Nepal compared to India's price of Indian Rs. 1-2 million per MW. Most of the Nepali applicants are “hydropower brokers” or entities that do not have the capacity to build the projects. Their real intention is to unload the licenses in the resale market with a hefty markup. So joining the queue is a profitable business.

This very reason will continue to delay the development of hydropower projects because the conditions and intentions of most of the applicants are to try and find “parties” who can buy their licenses at a higher price and a “free equity” portion in the projects.

This means that the Nepali people are losing big money in potential revenue because the government is ignorant of the current energy market. The estimated income from applications for 40,000 MW would be Rs. 80 billion (8,000 crores). This amount is greater than all the revenue that the government received from other resources in 2007. According to the CIA World Fact Book, the government earned US$ 1.153 billion in 2007.

This load of cash will allow us to pay for our oil imports and free the people from having to stand in line for hours to buy gasoline. It is also enough to build roads and transmission lines so that more hydro developers (Nepali and foreign) can exploit more hydropower resources and generate more revenue.

Currently, as most Nepali companies do not have the capacity to build projects larger than 20 MW, project licenses above this capacity are going to be sold to foreign companies. This means that the cost of the license for a hydropower project in Nepal is directly influenced by the cost of the license in India (which is also the power evacuation market for most of our larger hydro projects).

Today, Indian state governments charge a minimum of Rs 2 million per MW (Nepali Rs 3.6 million) to interested developers to even just apply to bid for the license. Go to www.hpseb.com/tender/nip3.doc and check it out.

While this is just the minimum fee to apply to bid for the license, state governments make interested bidders compete to quote their highest price (paid to the government) for winning the license. Companies like GMR of India (which is building the Upper Karnali project) paid Indian Rs 9.2 million per MW for such licenses. Look it up at www.tribuneindia.com/2008/20080216/himachal.htm#8. Brakel Corporation of the Netherlands and DS Constructions paid Rs 3.6 million and Rs 5.2 million per MW respectively to the state governments. Go to economictimes.indiatimes.com/articleshow/2162265.cms for the details.

Hydropower development companies in India are more than willing to pay this high price - and India is ensuring that it maximizes its revenue collection. Simultaneously, such competitive bidding for licenses ensures the entry of actual hydro developers instead of license brokers.

On the other hand, Nepal's licensing policy is handing out these precious licenses for almost free to companies who have seen this huge “discount” or to applicants who know they can sell these “discounted” licenses for a very high rate in the secondary market. This defunct hydropower policy is making Nepal and the people the real losers when our policies should be aimed at making them the real beneficiaries. This needs to stop right away!

If India can charge a minimum of Indian Rs 2 million per MW for a hydropower license and continuously receive much higher bids than this minimum, Nepal can safely charge Nepali Rs 2 million per MW which is still 37.5 percent lower than in India. The Electricity Department and the Ministry of Water Resources need to wake up immediately and plan to introduce this current market fee because of the following reasons:

• Nepal's rate is much lower than the going price in a country where its hydro power licenses should be directed.
• The real developers will be identified. The high cost of the license will eliminate brokers. Real developers would rather pay Rs 2 million per MW to the government than various brokers.
• Unless genuine developers come forward, hydro projects will not be built. This means electricity will not be generated and the country won't be earning money from royalties and taxes.
• Some will balk at paying Rs 2 million per MW complaining that the price is higher in India because there are more benefits to be had there. This is untrue.
  

Finally, there will be many critics who will question how Nepali developers can afford to pay Rs 2 million per MW and complain that the higher fees will discourage the development of Nepali entrepreneurs. Nepal's policymakers first need to think about the net benefits that can be received from this policy change in terms of the contribution to the country's economic progress. An increase in the rate will bring in more revenue for the government than it receives from all other sources.

There is nothing that should stand in the way of this policy change. However, it is also the moral responsibility of the government to ensure that Nepali hydro developers are encouraged. A reasonable compromise should thus be made. The price of hydropower licenses for up to 10 or 20 MW (the average capacity of Nepali developers) should be kept at its current rate of Rs 10,000 per MW. But for anything above that (in which most foreign parties will apply), the minimum rate should be set at Rs 2 million per MW.

Nepal's Hydropower - Deconstructing a Few Myths

(Courtesy: Ratna Sansar Shrestha)

1. Economic Potential in Excess of what could be consumed in Nepal

Nepal’s Water Resource Strategy[1] envisions that “by 2027, Nepal is exporting substantial amounts of electricity to earn national revenue”) but fails to specify the necessary installed capacity for the purpose. But one could easily visualize their train of thought by noting that the strategy stipulates that “by 2017, 2230 MW hydropower developed to meet projected demand of 2230 MW, including 400 MW for export.”

However, Professor Dr Ram Manohar Shrestha from AIT, in a series of his presentations, has stated that hydropower requirement for domestic market demand would be 23,000 MW in 2030 in order for Nepal to have per capita GDP in 2030 at the same level as that of Thailand in 2005 He has made an important point that has eluded the policy makers in Nepal, which is commendable.

He further postulates that Nepal could become rich by exporting the rest. I will revert back to the assumption that Nepal will benefit by exporting electricity. With regard to how much power Nepal can spare for export, people need to think outside the box and look at the issue from a different perspective. If Nepal’s economic potential of 43,000 MW is to be harnessed at the plant factor of 39.83% (as Professor Shrestha has used in his analysis), the electricity available will be 6,001 kWh per capita for the current population (25 million). With the population expected to reach 42 million in 2030, the electricity available will be a meager 3,594 kWh per capita. I am belaboring this point to link electricity consumption with the prosperity of a nation and its populace due to forward linkaged benefits like industrialization, employment generation, import substitution, etc. One needs to remember that most of the prosperous countries consume electricity above 10,000 kWh per capita (Iceland consuming the highest at 26,101.99 kWh per capita in 2007[2]) and for Nepali consumers to use 10,000 kWh per capita, the installed capacity necessary will be in the order of 120,000 MW which is a lot more than even the theoretical potential of Nepal. In this backdrop, it is disingenuous to say that Nepal has excess capacity. Therefore, people going about saying that Nepal has excess hydropower potential, the only use of which is exporting it to a neighboring country is misleading, at best, the uninitiated general public.

Instead of dedicated power from Nepal’s water resource, Nepal should plan to export energy during wet seasons and off peak hours when she is forced to spill her electricity generation capacity while during the same window of time the electricity demand in the south is at its peak, thus commanding premium tariff for Nepal’s electricity.

2. Mythical Hydro Dollars

A number of luminaries have been going about saying that Nepal can become rich by exporting electricity. Dr Shankar Sharma, former vice chair of National Planning Commission, has been quoted as saying that Nepal can earn a revenue of Rs 25,000 crore (a crore is 10 million) as such from 10,000 MW project implemented with Indian investment. While Mr. T N Thakur of PTC India Ltd. has been credited to have said that Nepal can earn INR 10,000 crore (at another time he said US $ 2,700 million) from the export 10,000 MW electricity. But detailed calculations behind these numbers are not available.

Professor Shrestha, in his presentation, has prepared a bar chart showing “How big could be the Potential Hydro Revenue” based on following data:

Hydropower capacity, MW Million USD
5000 MW; $1,476
10000 MW; $2,953
20000 MW; $5,906
30000 MW; $8,859

He says that Nepal’s incremental revenue will reach these levels with the implementation of hydropower projects at various capacity levels. With him coming up with USD 2.953 million that he expects Nepal to earn by exporting 10,000 MW, he is pretty close to Mr. Thakur’s estimate. A close look behind these numbers will help us deconstruct this myth too.

Professor Shrestha has used the tariff rate of Rs 5.41647 per kWh (equivalent to US $ 0.08463 at Rs 64/USD) which is way too high. Because, West Seti Hydro Ltd., for example, is slated to get only US $ 0.0495/kWh under the agreement it signed with PTC India Ltd. West Seti project generates peaking energy fetching higher tariff and, obviously, energy generated by the run of the river project will fetch a rate lower than this level. Therefore, the effective average tariff for export of energy to India will have to be substantially lower than US $ 0.0495/kWh. In view of this the above “Potential Hydro Revenue” computation is an act of overestimation based on unrealistically high tariff.

Secondly, but more importantly, people have also taken for granted that whatever an export oriented project earns by exporting electricity from Nepal will be the “hydro revenue” for Nepal. This inference is based on the presumption that Nepal will receive full proceeds of the export revenue as her own revenue and it will percolate into Nepali economy. In real life things don’t happen like that.

It must be remembered that, of the total export earning, the only amount that absolutely needs to be remitted to Nepal will reach here. Most of the export earnings will be spent on operation and maintenance, overheads, rates, taxes and royalties to the government and repayment of the principal and interest to lenders. The remaining will go to the equity holders as dividend. As hydropower is capital intensive, only about 2 percent of the export revenue will be expended on operations and maintenance of which less than one-fourth will be spent on salaries and wages. From the experience of the Khimti Project, we can assume that most of the high-salaried employees will be sourced from foreign countries while a few low-level staff will be hired locally. This means only about 0.1 percent of the revenue will be distributed as salaries and wages in Nepal.

The investment to implement projects of this scale will have to come from abroad due to the dearth of fund in Nepal – both debt and equity. Being a foreign direct investment project, the full amount of overhead expenses will be spent overseas. Moreover, FDI will not be too eager to come to Nepal if there is no income tax exemption. Therefore, these projects will be paying only capacity royalty of Rs 100/kW and energy royalty of 2 percent of the revenue during the first 15 years of its operation and Rs 1,000 per kW and 10% of revenue respectively afterwards. In conformity with the precedent set for West Seti project, these projects will be paying an export duty of 0.05 percent only. Hence, the government will be earning about 2.72% of the export revenue annually in royalties and taxes from the project.

As agreed above these projects will be borrowing from foreign financial intermediaries, the proceeds of debt service will not stay in Nepal. The balance will be distributed as dividend. And since most of the project's equity will come from overseas, the dividend will also flow there. Therefore, of the total export earning of the specific project companies, only 2.82% of it will enter Nepal’s economy. Again following the precedent set by West Seti project, the export oriented projects may give some free energy to Nepal, in which case Nepal’s revenue will go up by that amount. Therefore, in no case total value of the exported energy will become the revenue of Nepal. Specifically in the case of West Seti project, Nepal’s revenue will be about 12.82% of the project’s revenue (including free energy of 10%) and Nepal in no way will receive 100% of the project company’s export earning.

3. Nepal can become rich by earning royalties.

Professor Shrestha also compares earning from tourism with potential economic rent of hydropower for which purpose he has used the rate of royalty at US 1.5 ¢/kWh and has came up with following results:

Hydropower capacity, MW Royalty, million US $ @1.5 ¢/kWh
5000 MW; $262
10000 MW; $523
20000 MW; $1,047
30000 MW; $1,570

I agree with him that “At a given market price of electricity, per unit hydro rent (or royalty) would be higher in the case of the low generation cost projects (“more attractive” projects)” compared to high generation cost project. But, unfortunately for Nepal, this sound principle is not followed and, to borrow words from him, at “present hydropower royalty seems to be an ad hoc policy not based on the principle of economic efficiency.”

Under current ad hoc policy (enforced mainly on the basis of Electricity Act, 1992), the applicable royalty rates are as specified above. The effective royalty for first 15 years works out to a rate between 2.4% to 2.7% and around 14% to 16% afterwards. In view of this there is no way for Nepal to earn royalty from hydropower projects at the rate of US 1.5 ¢/kWh as the electricity is exported at a tariff less than US 6 ¢ per kWh (in which case the royalty rate will be US 0.15¢ only). Even at the higher tariff rate of US $ 0.08463 per kWh, that Professor Shrestha has assumed, the royalty income for Nepal will be at the rate of US 0.21 ¢ per kWh only.

To look at the issue from another perspective, projects in Nepal will have to export electricity at US $ 0.60/kWh in order for it to earn royalty at the rate of US 1.5 ¢ per kWh during first 15 years of operation which is highly unlikely, given the current market situation.

[1] Water and Energy Commission Secretariat, GoN, 2002

[2] Source: http://www.nationmaster.com/index.php

Related Posts:

Immoral Depletion of Scarce Resources
http://nepaliperspectives.blogspot.com/2008/07/immoral-depletion-of-scarce-resources.html

Nationalism as a Political Agenda - Defining Nepali Interests
http://nepaliperspectives.blogspot.com/2007/12/nationalism-as-political-agenda.html

From Freefall to Basket Case?

(Courtesy: Dr. Hari Bansha Dulal)

It's been four months since the Constituent Assembly (CA) election was held and we still don't have a legitimate government. Is it because the proportional representation system has started producing disproportionate results or because the self-portrayed progressives have resorted to the same old tricks played during the coalition era of the past decades?

If the government formation takes four months, how long will it take to undo the failures of the past governments and deliver the dividends of democracy? With this pace, when will the wholesale transformation of Nepal's political and social foundation and the apparent consensus be achieved between various ethnic groups in Nepal?

As usual, no political party is ready to take the responsibility for the current political impasse. Accountability has evaporated in countless networks, bargaining and search for compromises. Shouldn't someone somewhere be responsible for the current state of affairs?

A daughter of noted neurosurgeon was abducted in broad day light from the heart of the capital. Unable to rely on the professional ability of the security apparatus, the hapless father pays multi-million rupees in ransom for the safe release of his sibling. Dr Devkota's willingness to pay ransom to the abductors is an example of erosion of people's faith in government's ability to solve their problems. This is one among hundreds if not thousands of cases happening every month.

Our so-called intellectuals get baffled when high profile abduction cases like the one involving the daughter of Dr Upendra Devkota occur. Like an ignorant little child who suddenly wakes up after a bad dream, they start questioning the existence of the nation's security apparatus and the responsibility of the Home Ministry. Anyone keeping a close tab on Nepal can easily tell that the law and order situation in the country is in a shambles and it has been so for a long time now. It certainly did not happen overnight for anyone to miss it, did it? What appears as if the abduction of Dr Devkota's daughter was the first ripple in a perfectly calm lake? The lake has been muddied and unsettled for a long time now. It is just that in order to appear politically correct some of us chose not to question the abilities of the guards responsible to keep the lake clean and healthy.

We live in a country where the vice-president of the country flouts court order, home minister overlooks crimes (killers of Jitendra Sah and Ram Hari Shrestha are still at large) and the prime minister, instead of firing the incompetent home minister, uses him as his emissary. Lawlessness starts from the top and trickles down to the common man. Criminals at the bottom of this food chain of lawlessness are taking every opportunity to take the law into their hands because that is the example leaders are leading with.

The major political parties are intoxicated by foul poison of power and this is evidenced by their disgraceful attitude towards formation of the new government and writing a constitution. From old guards of Nepali politics to the new entrants like the Maoists, MPRF, and TMLP, political honesty is something that is seriously lacking. Moral nudity on part of the Maoists has become so apparent that it is hard to trust their words.

Needless to say, they were not trustworthy to begin with. When the chances of getting into the power brightens, they suggest the return of all seized properties and curbing illegal acts of their brigade of brigands (YCL), but as soon as their chances of clinching to the power fades, their threat-laden statements start flying in all directions. They get verbal diarrhea.

It is not only the Maoists that have mastered the art of deal making. Upendra Yadav has picked it in a relatively shorter period of time. He is ready to join hands with anyone and everyone so long as he gets his share. The Maoists' call for having a Madhesi president and a Pahadi vice-president was a logical one, but for Upendra Yadav, having his man as a vice-president was more important than ensuring ethnic balance in the top most posts of the land. For him, inclusion of other ethnic groups is irrelevant. So long as the process ensures the inclusion of the members of his vote bank, ethnic empowerment is on the roll!

In order to minimize the dissent that arises from the incompetence on the part of politicians, the political parties have divided the nation along political ideology and ethnicity. And with each passing day, the people are getting sucked into this game plan devised by our politicians to cover up their incompetence and enhance their own political agendas. If a Madhesi intellectual raises a red flag against functioning of Madhesi leaders, he is immediately branded as a traitor. He becomes an instant enemy of his community. Many Madhesis dislike the president simply because, in their eyes, he is not Madhesi enough. His clarion call for national unity is in collision course with agendas pursued by those that do not see anything wrong with vice-president taking oath in Hindi even though it is unconstitutional. If something is unconstitutional, it is unlawful. And, that is how it ought to be.

How we got here and where are we headed? Many of us decided not to raise our voice against the failures of our politicians because our beloved politicians have created an environment whereby anyone, who questions their ability to handle the situation well automatically falls into a least wanted category-status quoists. Is it finally time to realize that Bollywood-type happy ending is not something that happens in African-style drama?

Unless the people rise and make their voice heard, politicians are not going to mend their ways. If we continue to remain divided, we may lose any chances that we might have from this point onwards to emerge as a functional democracy and may end up as a basket case of Asia.

Nepal, in every sense, is a nation under construction. The depth and scale of the transformation taking place in every dimension of Nepal's social, economic, and political lives is very rapid and difficult for even experts to comprehend. The ongoing experiment of building a "New Nepal" if handled properly could be one of the most successful developments in the history of the nation. But if it fails, the consequences for Nepal could be tragic, and possibly catastrophic.

Asian Centre for Human Rights Report on South Asia - A Cursory Examination of Reporting on Nepal

(Courtesy: Comrade Libre)

The "South Asian Human Rights Index 2008, 1 August 2008" (http://www.achrweb.org/reports/SAARC-2008.pdf) is a publication worthy of reading. From pages 99 to 113, the ACHR (Asian Center for Human Rights) report chronicles in detail, documented human rights violations by all parties in Nepal, over the year 2007 (with reference to specific cases as far back as 2005).

While "naming and shaming" is certainly a powerful tool that is often used in the business of human rights advocacy, a dispassionate review of the ACHR report requires a certain level of detached realism. There are contradictions inherent to the implied recommendations, embedded throughout the text of this report. Some of these contradictions are outlined below.

Security and Human Rights Abuses - A Direct Relationship?

First, the obvious: Human rights violations in Nepal have reduced dramatically since the end of Nepal's Maoist insurgency. The lesson implied here is essentially that war leads to rights violations. The hindsight "epiphany" is that the Maoists should not have provoked Nepal's civil war and successive governments should not have retaliated using the State's military apparatus.

There is no rocket science to this observation. However, there is a stark reality that must be reckoned with - Maoist provocation has been rewarded with their stature as the largest party in Nepal's Constituent Assembly. Additionally, every single politician who advocated military mobilization against the Maoists, are in positions of power today. So where should the accountability of past abuses reside? Individual cases of abuses can certainly be prosecuted to the law's extent. But will legal action be complete without also implicating today's power brokers for their direct involvement in instigating Nepal's civil war?

Further, the following observation adds more confusion: "The biggest concern (in 2007) was not so much state violation but rather the absence of state." Considered in tandem with Nepal's ranking as six out of seven South Asian nations (the higher ranking implying relatively lower rights abuses), a direct correlation is implied between human rights violations and the presence of state forces. The contradiction here is that the ACHR report highlights the absence of state forces as a point of concern while simultaneously suggesting that when the state forces were out of their barracks, human rights abuses were rampant.

Ironically, the great work that human rights defenders within and outside of Nepal have done is partially responsible for the near collapse of the law and order situation in Nepal. When reports are continually headlined with subjective criticisms along the lines of "excessive force," the net result is lawlessness. Security agents are increasingly aware of the repercussions of applying force and hesitate to react even under conditions that warrant the application of force. The ACHR reports correctly states that "the morale of the police was very low (in 2007)." The degradation of morale is directly related to a sense of duty that repeatedly clashes with ambiguous guidelines on the acceptability of action.

This does not mean that the application of "excessive force" should be excused but rather, that the state security forces should be educated on "acceptable" levels of force. For example, is baton charging "acceptable" when public property is being destroyed? Is it "acceptable" to return fire when a VIP convoy comes under fire? Is it "acceptable" to expect the maintenance of law and order with merely the presence of security forces?

There is a fine line that human rights defenders must walk in situations like Nepal where the entire state structure is under indictment and as a result, does not have the capacity to defend its security forces' actions. In other words, the idea of security forces as one of many of the State's organs, with ultimate accountability residing at the political tier, is a notion that needs to be urgently institutionalized. Only then will criticism based on human rights, yield the desired impact.

Politicization or Civil-Military Relations? Which is the Lesser Evil?

This line of thought is a good transition to what is perhaps, the most provocative statement in ACHR's report: "Nepal lives under the shadow of a highly politicized anti-democratic Army… who are not accountable to anyone except themselves." Coming from a organization that itself is unaccountable to anyone (and everyone at the same time), such a statement is hypocritical, callous and counterproductive to the overall human rights agenda.

First, politicization is a two-way street - it's not as though the Army decides to politicize itself and align with say, the Nepali Congress without the Nepali Congress welcoming the move. Second, if in fact different factions in the Army are reaching out to different factions of the political spectrum, is this necessarily bad because the institution is being politicized or good because civil military relations are improving?

Further, is the Army anti-democratic because Girija Prasad Koirala retained COAS Katuwal as its head or was Koirala anti-democratic for recognizing that the sustenance of democracy and stability hinged on retaining a balancing threat of force against a radical communist party, bent on establishing a one-party communist republic in Nepal? Criticizing the Army with the benefit of 20/20 hindsight is immensely more simple than accounting for scenarios that did not materialize by keeping the Army's chain of command intact.

The contradictions, once more, are glaring. In the same report, the ACHR criticizes the Army for being politicized, for civil-military relations being insufficient and for the Army being un-democratic and unaccountable? To whom should the Army be accountable without catering to the political forces and in return, becoming more democratic through enhanced civil-military relations?

If the intent of the ACHR report is to pass judgment on the entire Nepali Army through its COAS, then in the tradition of professional impartiality, perhaps equal judgment should also be passed on the Maoist leader Puspha Kamal Dahal (who is not only the Maoist political head honcho but also the supreme commander of the Maoist "PLA")? The parallels are apparent; yet, the ACHR's reporting is not.

"You Scratch my Back, I'll Scratch Yours" - UNMIN and AHRC

On the subject of accountability, the AHRC's readership may also be drawn to the subtle advocacy performed on behalf of UN agencies in Nepal - namely, the UNMIN and the OHCHR. According to the AHRC report, Nepali actors have "failed to understand or overlook the positive impact of these international agencies in favour of criticising UNMIN for what often appear to be little more than often ill-informed and politically motivated purposes."

In reality, what Nepali actors had failed to understand was the extent to which the UNMIN could have been mobilized to further the cause of sustained and lasting peace in Nepal. But in all fairness, the political motivation behind such failure, goes both ways. Nepal's political class should have provided the UNMIN a mandate to which the UNMIN could have been held accountable; Ian Martin on the other hand, with his first hand experience in Nepal, should have sought a mandate that would have been more impactful.

The misunderstanding that has resulted in overshadowing what little good the UNMIN has done, is actually a latent recognition by the Nepali elite that Nepal's government gave the UNMIN a limited mandate with plenty of room for interpretation and that Ian Martin, happily accepted a multi-million dollar contract with enough loop holes to limit his organization's exposure. For an organization desperate to recreate its diminished relevance, Nepal became to the UN a "gift that just kept on giving." This is what most educated Nepalis resent.

A civilian was kidnapped from Kathmandu and murdered in a cantonment monitored by the UNMIN; the UNMIN's documentation of arms it has inventoried is still unavailable for public consumption; there are so many lingering questions on the Maoist combatant verification process (and the track two dealings between Ian Martin and the Maoists), that the results are still in question; Ian Martin, Kofi Annan, and Maoist leader Baburam Bhattarai sharing laughs over beers (at the very onset of Nepal's peace process), became an iconic image of the UNMIN's compromised impartiality .

The AHRC report cites the YCL as a liability to Nepal's peace process. Is the AHRC aware that Ian Martin was fully cognizant of the on-going rotations between the YCL and the Maoists' PLA, at the very founding of the YCL? His admission behind closed doors in New York, amounted to turning a blind eye in favor of helping the Maoists democratize. How democratic is the YCL and how effective was Ian Martin in faciliatating the YCL's birth?

In all fairness, Nepalis have not overlooked the positive impact that UN agencies have had on Nepal. It is rather insulting that the AHRC would insinuate ungraciousness on the part of Nepali people whose criticisms of UNMIN's work, are factually justifiable and on the whole, overwhelmingly legitimate. The UNMIN has received criticism where criticism has been due - namely, in its non-transparent, often partial, and unaccountable mode of operation.

Conclusion

Despite the apparent contradictions in the AHRC's report on Nepal, the report is well worth a thorough read.

The value in the AHRC's report is the detailed documentation of human rights abuses (and allegations) in Nepal. Although much of the material is regurgitation of facts and figures already published through various national and international sources, the benefit to consolidating and (re-highlighting) such egregious acts of abuses, are self-evident.

Overall, the ACHR's report is impartial in its allocation of accountability to actors across Nepal's political spectrum. The report correctly identifies widespread impunity as the root cause behind continued human rights violations. More importantly, this report touches upon a defining facilitator of continued rights abuses - a myopic focus on short-term political horse trading at the cost of long-term stability.

Having correctly identified the weaknesses in Nepal's peace process, what is sorely missing are implementable ideas / recommendations on how best to rectify such deficiencies. Given the contradictions highlighted above, solutions to Nepal's current predicament are anything but apparent.

Related Posts:

UNMIN Finally Speaks Out - A Critical Examination of UNMIN's Letter to News Front
http://nepaliperspectives.blogspot.com/2008/02/unmin-finally-speaks-out-and-pulls-foot.html

The Nepali Army is a Favorite Target for Cheap Provocateurs - An Analysis of a Nepali Adolescent's Professional Obituary
http://nepaliperspectives.blogspot.com/2007/12/being-cheap-provocateur-is-easy.html

UNMIN in Need of Immediate Reform
http://nepaliperspectives.blogspot.com/2007/11/unmin-in-need-of-immediate-reform.html

The Problem with Nepali Political Civil Society - The Leftist, the Cowards, and the Compromised http://nepaliperspectives.blogspot.com/2007/10/problem-with-nepali-political-civil.html