The Relevance of Electric Transportation in Nepal

(Courtesy: Bijay Man Sherchan)

Although Nepal is known to be rich in hydropower potential, the country has adopted policies whereby transportation is almost totally based on imported petroleum based fossil fuels. The nation is paying heavily in foreign currency for import of the petroleum products with an average 100,000 kilo liter monthly demand of petroleum products in the country. And this consumption is increasing every year. As per statistics of NOC the amounts spent on import of petroleum products in 2007 and 2008 were Rs. 33.1 billion and Rs. 37.77 billion respectively.

The use of petroleum as the fuel for transport is not only a heavy burden on the national exchequer but its use results in many harmful effects. The transport sector is the primary reason for atmospheric pollution as petroleum fumes cause harmful emissions such as CO2 and suspended particulate matters that are detrimental to health. The use of petroleum based transportation results in increased economic costs : billions of Rupees spent on the import of petroleum fuels, decreasing air quality resulting in increasing health related cost, decreased productivity for the economically active population and rising inflation due to rise of international oil prices.

Given the above scenario it is high time to debate on the relevance of clean electrical based transport in Nepal. In this context, a brief look into the development of electricity based transportation is relevant.

The Historical Overview

The first effort in using electricity based transport in Nepal was in 1960 when USAID assisted in implementation of a 43 km long bi-cable goods ropeway between Hetauda and Kathmandu. This ropeway with capacity of 22.5 ton per hour performed well during the initial years when the Tribhuwan Rajpath was the only road link between Kathmandu and the Terai. With development of other better roads from the plains to Kathmandu the relevance of ropeway transport diminished and as the system was under the management of a poorly-managed government owned corporation (Nepal Transportation Corporation) the system soon became defunct.

The second important event in the development of electricity based transportation was the implementation of the trolley bus system between Kathmandu and Suryavinayak in Bhaktapur. The construction of the 13 kilometer long trolley bus system was undertaken under a grant aid of the Chinese Government and was completed in 2 years (1975 – 1977) with an investment of Rs. 40 million. The trolley bus system with 15 stations was a very popular means of transport and ferried between 10,000 – 11,000 commuters daily initially and the volume increased to 20,000 per day. Initially 22 trolley buses were in operation and in 1997 10 more buses with bigger passenger carrying capacity were added to the fleet. The system operated 16 hours a day and had a very low passenger fare of Rs. 3 - 4 depending on the travel distance. The hey days of the trolley bus system started to decline with the advent of democracy in the country. The culture of "Bandhs" and "Chakka Jam" and "tod fod" seriously effected the operation of the trolley buses. The politically affiliated ministers started using the trolley bus unit as an employment centre for their political cadre. The system of subcontracting of passenger fare collection to the drivers (Rs. 425 per trip for smaller and Rs. 475 for the bigger buses) resulted in a situation where the drivers became rich and NTC poorer by the day. The over staffing and low productivity led to a fast deterioration in the financial viability of the enterprise. Lack of funds led to deterioration of maintenance, depletion of spare parts stocks and finally scavenging of the buses whereby parts of the operating buses were removed for use as spare parts. The system soon collapsed and in December 2001, HMG by a cabinet decision, decided to close down the trolley bus system after 27 years of eventful operation. Subsequent efforts of the Government to restart the trolley bus system under the management of the Municipality of Kathmandu, Thimi and Bhaktapur failed as there was lack of commitment to the cause and lack of effective management.

The year 1993 will be remembered in history of development of electricity based transportation as one of the important landmarks. Under USAID funding an American INGO called Global Resources Institute was mandated with the task of developing a proto-type 3 wheeler run by batteries. This proto-type was christened as the Safa Tempo. After six months of trial operation the 7 Safa Tempos were handed over to Nepal Electric Vehicle Industry (NEVI) a company formed by 28 Nepali professionals dedicated to the cause of environmental protection in Nepal. NEVI operated the demonstration fleet and together with a few other EV manufacturing companies started assembly of the Safa Tempos for commercial operation on various routes within Kathmandu.

A decade and half later Kathmandu has a fleet of 650 Safa Tempos running on 14 various routes and cater to 130,000 commuters daily. 31 charging stations cater to the battery charging requirements of the Safa Tempos. While USAID quick started the development of the 3 wheeler Safa Tempo, it was DANIDA which further supported the development of the EV industry by creating a Clean Vehicle Fund to support research, development and promotion of the EV's. Under this program DANIDA funds were made available for training of drivers and technicians for the EV industry, for operating 4 battery charging stations in Lalitpur and for procurement of 48 EV's by the private sector. Almost half of the drivers of the Safa Tempos are female drivers trained under the Danish program.

While the unusual strides made in Nepal in the EV industry may be a matter of appreciation within the world community the number of Safa Tempo has not risen beyond 650 due to many reasons. The difficulty for acquiring route permits by Safa Tempo and domination of existing route by the diesel mini/microbus syndicates have made the increment of EV's virtually impossible.

The Way Ahead

The good work done in the initial development in the EV sector should continue and GoN should adopt short-term and long-term measures in expanding the horizon of electricity based transport for the overall benefit of the nation and its people.

The short-term measures that the government could adopt are the following:

a. Devise policies whereby clean transport based on electricity is given top priority and protected by providing incentive in excise duty and customs exemptions and reduced electricity tariff for night time charging of electric vehicles;
b. Adopt policies whereby the approximately 700 polluting LPG operated vehicles plying in Kathmandu are converted into battery run electric vehicles;
c. Adopt policies whereby vehicles over 15 years are given due incentives for converting into electric vehicles;
d. Create zones in tourist destinations such as Chitwan, Lumbini and Pokhara and historically important places such as Kathmandu Durbar Square, Patan Durbar Square, Bhaktapur Durbar Square are accessible only to electric vehicles;
e. Allot priority to electric vehicles while issuing route permits for passenger vehicles

The above steps would yield results beneficial to all. In a study conducted by Clean Air Network Nepal it has been found that if 1,000 old gasoline vehicles were to be converted into electric vehicles, NEA would receive Rs. 25 million as additional income from sale of its night time spilled energy, a national saving of Rs. 219 million would result due to saving in import of petroleum fuels and the individual operator would benefit by Rs. 137,000 annually as savings in vehicle operation cost.

The long-term measures that the government should adopt are as follows:

a. Revive and operate trolley buses for transportation to the maximum extent possible. The defunct Kathmandu – Bhaktapur trolley bus should be reinstated once the widening of the Arniko Highway is completed. Extend trolley bus operation along the Kathmandu Ringroad, along the Bishnumati Corridor and operate radial trolley bus routes to Godavari, Kirtipur, Kalanki and Budanilkantha. Implement trolley buses in the Terai along feasible sectors such as Jogbani – Dharan, Birgunj – Pathlaiya, Sunauli – Butwal and Nepalgunj – Kohalpur;
b. Implement electric train services as mass transport system on feasible routes such as East West Highway, Fast Track Road Corridor, Kathmandu – Pokhara and Kathmandu – Khasa corridors;
c. Implement ropeway transport in hill areas which do not have road access;
d. Encourage the private sector by providing correct incentives for implementation of cable cars;
e. Support the creation of a research and development institute to promote the EV industry.

Given the proper priority, incentives and attention from all relevant quarters, Nepal could once again regain its Shangri-La status – this time as the Shangri-La of EV's.

(Mr. B.M. Sherchan is the immediate past Chairman of Electric Vehicle Association of Nepal)

Mirage of Illusionary Benefit of Rs 45 Billion from Pancheshwar Project

(Courtesy: Ratna Sansar Shrestha)

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

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

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

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

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

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

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

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

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

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

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

Sharing Water Resources

(Courtesy: Ratna Sansar Shrestha)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Role of Energy in New Nepal

(Courtesy: Kalyan Dev Bhattarai)

To day from politicians to intellectuals all are talking about new Nepal, future Nepal, inclusive Nepal and blab blab. The objectives of the different groups may be different to speak about new Nepal, from deceiving the poor innocent people to fulfill their petty interest to real determination of developing the country in new and progressive way. However, what ever pretext you add in front of Nepal to stress your determination to develop Nepal, it will not be fulfilled until you are able to use your available natural resources like the water, herbs, forest, manpower, natural diversity, traditional culture, and etc to the maximum possible in optimum way.

Our small lovely country is well equipped with many types of resources like human, raw minerals, water, forest, and many others but due to lack of political willpower, rampant corruption and absence of required dedication to develop the country, we are unable to use our available resources even to the minimum level. Here we all must understand clearly that by the rhetoric speech of the present day corrupt politician the country can neither develop nor solve its centuries old problems of poverty, exploitation, illiteracy, caste & religious supremacy, corruption, and lack of awareness. These were the main issues and responsible for the Maoist to raise arms and if we are unable to solve these problems some new power will develop in the country and start another arms struggle. To solve all the mentioned problems country need new leadership of young generation with new vision and determination with self respect earned through the honesty and dedication to wards the country. The same old corrupt bunch of hypocritical present day leadership can bring no change.

The vision of future Nepal can not and will not be materialize by following the same old culture of deceiving people and fulfilling the vested interest of few corrupt and proven failures of the past. Future Nepal must be visualized by youth generation to include their aspiration and fulfill their political, social and economical requirement rather than by the same old bureaucrats and decision makers, who have bitterly failed not only to fulfill their responsibility but also to lead the country in the path of development and also bitterly misused and sabotaged the trust of the people. See how cunningly the present P.M provided millions of rupees to his brother Mr. Sushil Koirala in the mane of medical treatment and also to K,P Bhattraai to build his house. Such type of looting the national property is the main objectives of present day leaders and to hope that the same corrupt politicians will build new Nepal is intellectual bankruptcy.

With this introduction I am limiting myself in this article to the role of energy in future Nepal, provided the country is lead by new young generation. It is a well known fact that Nepal has the vast water resources to develop our country provided the country can come out of the old stupid notion that “Nepal can be rich by selling electricity to India” This totally wrong, and antinational concept is developed and campaigned by water mafia group, who from their illegal earning are able to influence the decision makers and other concerned sector of the society as they have plenty of liquid cash earned through commission and other wrong doings. The simple logic of business is that one who invests will get the fruit of profit. Nepal at present economic scenario can not investment required money for possible mega projects and who invests in such projects they will benefit from such projects. The government can be expected to get the fixed royalty as mentioned in the water law and other benefits mentioned in the agreement if any, which can not be major to make any country rich, as in such scenario no outside investor will come to invest huge money.

If we can come out of this stupid notion of selling the hydropower energy to India and getting rich, the opportunity is there to vastly develop our own country by using our own resources for our own benefit. Hydropower is one of the main available natural resources, if properly used can play very important role to develop Nepal fast and vastly fulfilling the vision of new-Nepal. The vision of new Nepal can not be achieved fully depending upon donor’s co-operation, aid and loan. All such cooperation is required for developing country like Nepal, but only as a secondary source, the primary source should be the proper utilization of our own natural resources, honesty, and strong determination to develop the country. Hydropower is one of the main natural resources of the country available for the development of the country. I see the following uses of hydropower in Nepal to cope with the requirement of new-Nepal.

Present scenario

At present Nepal produces only 397.89 MW (Excluding the three thermal power installation of 55.66 MW in total) out of possible 83000 MW potentialities, out of which 42330 MW is proved economically feasible. This shows how poor is our utilization of available resources.
The 550 KW Pharphing hydropower plant was the first hydropower of country which was installed during 1911. It took more than three decades to add another 640KW Sundarijal plant. Further 2.5 MW plant of Panauti was added in 1965.In 1989 the total installed capacity reached to 250 MW due to cooperation of friendly countries and financial institution like World Bank.
The hydropower development was very slow due to various factors and the period of nineties was wasted arguing on the yes or no for Arun III project. In 1995 World Bank pulled out from Arun III which placed the country in imbalance situation of demand and supply, forcing the country to start load shedding

At present load shedding is regular phenomena and future looks more blink. Even with the present growth rate the projected demand of the country by 2020 will be 1840 MW suggesting big gap in supply.

In this scenario our thrust for the optimum utilization of our available resources of the Hydropower should be to develop Hydropower in the range of 50-60 MW cumulatively in all the 75 districts instead of thinking of Mega projects like Pancheswor, Mahakali etc. This policy of developing of Hydropower in all the 75 districts will provide regional balance on development and provide benefits on social, political, and techno-economic sectors. With this policy we will be able to generate a kind of trust to the people from east to west that they are not neglected and included in the path of development. Further this will provide the required energy to all the 75 districts for the industrial growth as well as for other purpose like domestic etc.

Transportation

Transportation is one of the vital sectors for the development of the country to materialize the dream of the new Nepal. Without linking all the seventy five districts of the country with each other to facilitate the flow of the products of each district easily and cheaply, the vision of new Nepal can not be fulfilled. To day we are in such a pathetic situation where we can not supply our own products like apple of mustang, Junar of Ramachap and food grains of southern belt, to all seventy five districts and force to import the same materials in costly price from outside. I feel shame to accept that even after 56 long years of so called independency many of my country’s districts are not connected by road and poor citizen must walk along the ups and downs of the hills to go from one part of the country to other parts even to fulfill simple requirements of governmental formalities.

The frequent landslides and other problems especially during rainy season which hamper the road transportation is mainly due to, the fact that we are forced to cut the slope during the road construction to maintain its required width.

Net work of Electrical Trains

The best solution to visualize the new Nepal is not to connect the districts by 4-6 lane wide high ways but to connect all the seventy five districts of the country with narrow gauge electrical train. This will utilize the available hydropower of the country and save billions of foreign currency which are used to buy fossil fuels from foreign countries. Further this will fulfill our requirements of transportation network essential for the country’s development. The technology is so well developed that it is not necessary to build wide and standard highway which forces us to cut the hill slope to high degree making the landslide and other natural disaster inevitable, to fulfill our transport network, which can be easily accomplished by network of electric train. In addition to this electrical train along the east-west highway will also save lot of money which can be used for other development process

Trolley buses

Similarly the use of trams and electrical buses in the major cosmopolitan cities like Katmandu, Pokhara, Biratnagar, birgung, Butal, Bhairava and many others will save our hard earned foreign currency which are used at present for buying fossil fuels like petroleum, diesel etc.

Rope Ways

Nepal being mountainous the transportation of any construction or day-to-day usable materials from one place to other is very difficult, costly and time consuming. The rope way which has huge potential in the country and very useful as well as practical also can be well developed by properly utilizing the hydropower of the country and can change the development scenario of the country to fit with the vision of new Nepal.

The only cable car of Manakamna has proved that if properly use, cable car can also play very important role in transportation sector, and also can be successful commercially also. There are many potential sites where cable car can be as successful as Manakamna. In new Nepal I see many cable cars all round the country connecting the important temples and tourist center like Muktinath, Gosaikunda, Pathibhara, Thorang, Pass etc.

Industry

The vision of new Nepal can not be achieved with out industrial revolution in the country. Industrial development of the country is very essential to develop our country fast to fulfill the basic requirement of the new-Nepal and the most important factor for the industrial growth is the easy availability of required energy in reasonable price. Without required energy you can not imagine of industrial growth in the country and without industrial growth you can not fulfill the vision of new Nepal.

Fortunately our country has huge potential of hydropower to fulfill the requirement of energy for fast and vast industrial growth to any scale. To day due to high price and unavailability of electricity many potential industry like cement factory, electrolysis, are not feasible in Nepal even though other requirement like raw materials and labor force are easily available in competitive price. Even the existing rubber factory is in problem simply because it can not depend on the energy supply of the NEA and forced to use high priced diesel generated energy to fulfill its requirement

Not only cement and rubber Industry many other industry like automobile industry, electrolysis of water to separate oxygen and hydrogen where the hydrogen can be used to develop fuel to cars, and oxygen for hospital, pesticide/fertilizer industry, canning industry especially where the available fruits like orange, apple lemon, Junar etc have limited market in its natural form due to various reasons can be easily developed provided the energy is available in cheep price.

To-day Nepal lacks industry not because it has no essential raw materials but because any industry becomes economically unfeasible due to high price of energy and compulsion of under table money in every step of our development. At present the government acts as a hurdle for any type of industrial development or any entrepreneurship and can be said without any hesitation that without bringing change in this attitude the vision of new Nepal is impossible. With the hope that the new government of Maoist will take necessary measurement to curb the rampant corruption through the development of due punishment culture to the corrupt people in the country, the development of hydropower will help for the industrial revolution in the country.

Fisheries

Fisheries development is another sector where the tailrace water of hydropower can be properly used and economic benefit can be obtained.

Agriculture

Agriculture is another sector, the development of which is essential to achieve the vision of new Nepal. Nepal being agricultural country and most of the population of the country being engaged in agriculture and its related activities, to imagine Nepal will develop without development of agriculture and its related sector will be foolishness. In this context the role of hydropower become very important to develop the agriculture sector. Irrigation is one of the important parameters for the development of agriculture sector that cannot be optimally developed without the energy being available at reasonable cost.

The government plan to invest heavily on irrigation scheme especially using the underground water through shallow as well as deep tube well scheme. Today most of the tube well scheme is being unproductive mainly due to the heavy tariff of electricity, especially after the removal of the subsidies in the shallow tube well scheme. At present government is continuing the subsidies in the surface as well as deep tube well scheme, but under great pressure from international donor agencies to remove the subsidies. By optimally using our available water resources for the generation of hydropower, the price of the energy can be brought to affordable rate, which will create such a situation where the subsidies from government will not be required for any type of irrigation scheme.

Cold storage and chilling house

The potentiality of chilling house and cold storage in Nepal is very high due to the transportation problems. To fulfill the aspiration of people, new Nepal need as many chilling house and cold storage as the cold drinks and wine shop are noticed to-day. To day due to high energy tariff few of the existing cold storage and chilling house are also not functioning properly and economically unviable. The unsuccessful stories of chilling house and cold storage are mainly due to high energy tariff and we must make the energy available in cheep and affordable price. This is possible if we start developing hydropower at the range of 70-100MW cumulatively in each districts.

Herbal Plants

Nepal is very rich in herbal plants and all types of medically important plants are available in the country. But unfortunately the Nepalese people are unable to use such available resources of the country which are exploited by few corrupt people. This is because the government lacks the proper planning to tap all these available resources and make the best use of these resources. The vision of new Nepal will not be successful with out using tall such naturally available resources of the country. To use all such herbal and other related plants we must have numbers of pharmaceutical industry in the country and that is possible provided we can supply the uninterrupted energy in affordable price. This is not possible with out developing our vastly available hydropower.

Replacement of Traditional Energy

It is a known fact that to day electricity cover only 3% of our total energy use and rest all are cover by wood, fossil fuel, cow dung and etc. Such use of energy in a country where the potentially for hydropower is huge is very ridiculous. Further the environmental effect by use of all these energy and its ill effect in the health of the population are also well known. In this context the new Nepal must replace all such use of traditional energy like wood, cow dung fossil fuel etc by clean energy so that the environmental ill effect as well as the health hazards are minimized. Such replacement is possible only if we changed our concept that Nepal can be rich by selling energy to India and start using our resources for our own use for the development of the Nepalese people.

Conclusion

In this short article I can not deal all the related matters in details. My stress is just to express that the new Nepal concept can not be achieved simply by formulating plan but require some drastic modification in the development concept. Hydropower is our resources and best use of these available resources for our own development is the only possible and feasible solution. So far country’s policy is prepared based on personal vested interest without giving any importance to the development of the people. Time has come now to change our development concept and start doing something seriously for the development of the country and its people.

Federalism Will Hinder Optimal Exploitation of Water Resources

(Courtesy: Ratna Sansar Shrestha)

For this scribe “People’s Movement II” is “Rhododendron Revolution” of 2006 which not only paved path for the abolition of much maligned monarchy, subsequent to Royal Palace massacre – reportedly committed by the then Crown Prince who is alleged to have committed suicide after committing heinous crime of regicide (also patricide), matricide, fratricide (both bother and sister) and also killing off an uncle and couple of aunts (however, most of the people still do not believe this “yarn” – which denigrated royalties (mainly the last “monarch” of Nepal and his son) in the eyes of the “loyal subjects” of Nepal, in 2001 June, but also afforded an opportunity for the people of Nepal to write a constitution of their own – through the elected Constituent Assembly. The assembly is supposed to decide the form and content of the constitution and also the structure of the state as to whether federal or unitary. However, the overzealous people in the commission writing Interim Constitution went out of way to declare that Nepal will be a federal state; preempting the people’s representatives in the assembly from deliberating about it and arriving at a well thought through decision. Now it has become a contentious issue as to whether spinning off of Nepal into an indeterminate number of provinces under federal structure is really a good idea. Here an attempt is being made to analyze how will federalism affect optimal exploitation of water resources.

Water Resource – Unique Natural Resource

Optimal exploitation of most of the natural resources can be done locally. They can benefit by cultivating land, harvesting it, collecting herbs, living off forest or extracting minerals. But water resource is a different kind of natural resource and things are not that simple with its exploitation. Local inhabitants can benefit, for example, by building micro hydropower project (less than 100 kW) or from water based tourism like rafting. But exploitation at a larger scale to benefit from scale economy results in different set of additionalities and externalities.

Construction of a run-of-the-river (RoR) hydropower at a specific site deprives upper riparian populace from using the river water for consumptive uses (i.e. irrigation) as any reduction in the quantum of water will result in decrease in electricity generation and in turn downsizing the revenue stream. Similarly, a patch of the river will become dewatered as water will be diverted from the river into powerhouse through a network of canal/tunnel and eventually penstock pipe by building intake. The people dependent on this patch of river will face severe water scarcity – amply demonstrated by the dewatered area in Marshyangdi River by the highway to Pokahra. If the users of electricity come from a different province, the people adversely impacted as such will never agree to construction of implementation of hydropower plant in their province resulting in failure to generate electricity at optimum level.

Reservoir Project

Contrasted with RoR project, a storage project will entail building a reservoir resulting in inundation/submergence of large tracts of fertile agricultural land, forest and even extant infrastructure and will also displace the inhabitants. Daily pondage project also causes similar adverse impact, by a lesser magnitude, though. In this scenario, people of the province set to lose their land and to get displaced will not be too eager to build a project if the electricity is to be used in another province. Moreover, storage project also generates downstream benefit in terms of augmented flow which benefits the lower riparian people by making water available for water supply, irrigation, industrial use, improvement of watershed and they can also use the same for water sports based tourism and navigation. In this backdrop people in upper riparian province will have no reason to agree to build such a project, thus scuttling the prospect of implementation of a multipurpose project, but for federal structure.

Resettlement of people displaced by a multipurpose project will also become problematic as there is scarcity of good land in the hills where such projects could be sited while the resettlement in the area where necessary land is available will not be allowed for reasons of disturbing ethnic balance. Tharus in western Terai are already objecting to the resettlement plan for people to be displaced by West Seti project. After formation of separate provinces, the ensuing tussle will take the form of agitation as to why should upper riparian province lose land and its people to electricity for some far off city.

Irrigation and Flood Control

Nepal has 3.97 million hectares of cultivated land (mostly in Terai) and only 0.5 million hectares (only 12.6%) has some irrigation (mostly during rainy season). Cultivation of multiple crops in a year – imperative to ensure food security in the country (including high value cash crop that will make the farmers there prosperous) – requires massive irrigation during dry season which is possible only by building a reservoir in the hills that will store water during the rainy season (about 4 months in year) for irrigation during other 8 months. Building reservoirs as such will also control flood in the river’s flood plain in the Terai. But such a scheme will be precluded after splitting the country into federal structure for reasons explained above, especially if Terai is to become a separate province.

Electricity

Suppose it is decided to have 5 provinces in the lines of current development regions, then western development region will be generating most of hydropower (over 329 MW), using only about half of its generation capacity, while eastern region will be consuming a lot more than what it generates (under 14 MW). Central development region will consume a little more than it generates (275 MW). Under federal structure this type of happy sharing will not be possible. Simple issue like pricing can spin out of control and provinces with more generation capacity can shut off power if the price is not right.

Dispute over water resource

What is happening in India should be an eye opener for us in Nepal about to cross the threshold into federalism. There is dispute between Punjab and Haryana over Yamuna Sutlej Link canal. A clutch of states are fighting over Narmada and Tamil Nadu and Karnataka do not see eye to eye on Cauvery. All this is impeding optimal exploitation of water resource in India, although she has adopted federal structure due to her huge land mass.

Negotiating power

From Koshi through Gandaki, Tanakpur and Mahakali treaties Nepal has ended up getting raw deals. These things took place before Nepal went federal. After implementing federalism, each province will be squabbling with other province/s and Nepal’s negotiation capacity will be further weakened vis-à-vis India and the nightmare of a “monkey” from abroad settling dispute between two “cats” over sharing of a bread of loaf (water resource) and monkey ending up eating the bread bite by bite will become a reality. Merely this should persuade patriotic Nepali people from breaking up Nepal into several provinces real.

Conclusion

Implementing water resource projects in a federal structure will become difficult/daunting task due to competing demands over water and clashing aspirations of each province and several provinces. The complications will get compounded due to the convention of demarcating provinces by using rivers as the boundary. This will result in diametrically opposite aspiration of one province with that of the province on the other side of the river.

In view of this, and also due to the fact that Nepal is as small or smaller than a reasonable sized province of India and most federal nations, we need to tread cautiously before going for federal structure. As far as water resource is concerned, splitting the country in haste will provide us ample opportunity to repent at leisure.

(A shorter version of this writing was published in the Nepali Times # 449 (1-7 May 2009).

India Halts Power Supply Deal – No Wonder!

(Courtesy: Ratna Sansar Shrestha)

The following was reported by myrepublica.com on 24th April:

"KATHMANDU, April 24: The action initiated by the Maoist-led government against army chief General Rookmangud Katawal and the polarized views of the political parties on the issue have now affected the power import deal between Nepal and India.The Indian government on Thursday put on hold the agreement to supply 30 MW power to Nepal just two days before it was supposed to be signed."We had finalized everything from our side. But the agreement has now been put on hold," a Nepal Electricity Authority (NEA) official told this daily. The source informed that as per the request of the Bihar Board, a letter requesting government of India´s approval on the agreement was sent to the Ministry of External Affairs in New Delhi through the Indian embassy in Kathmandu on April 22. However, the Ministry did not send a consent to the request.A week ago, the NEA had forwarded a memorandum of understanding to the Power Board of Bihar to import the additional 30 MW of electricity at the rate of IRs 4.79 per unit for a period of two months.“Both sides had settled all issues and conditions for the import,” the source added.The Power Trading Corporation (PTC) of India was making necessary arrangements for the import to Nepal via Ramnagar in Bihar.The development comes amid reports that the Indian government has been inserting pressure on the Maoist-led government in Nepal against the dismissal of the army chief.Indian ambassador to Nepal Rakesh Sood on Thursday flew to New Delhi, canceling all appointments here, to brief the South Block on the ´current developments´ in Nepal."

However, it will take a while for it to dawn on most of our hydrocracy (bureaucracy, politicos, intelligentsia, media persons, business community, bankers involved in the hydropower sector) that export of power to Nepal is an additional weapon in Indian arsenal for her against Nepal (as is the trade and transit) to ensure that Nepal toes the line, they want her to. I dare to trust that people in Nepal haven’t forgotten (although “people” are famed to have very short memory) about the trade embargo and transit blockade that India imposed on Nepal in late 80’s leading to “people’s movement I”. What ensued is in the pages of history obviating repetition here.

In the same vein, when I read about Nepal’s plan to import 500 MW from India, while I was vacationing in Vientiane with my brand new granddaughter, I had tears in my eyes trying to stop myself from laughing uncontrollably for quite a while. This was exactly what I was worried about – India using “power” (electric) to have Nepal dance to their tunes (according to their caprices). Besides, I felt sad and also felt like smiling (simultaneously!) at the tragicomic situation, after reading that PTC has offered a “generous” rate of INR 3 while Nepal is set to export at NPR 3 – offering a handsome markup of 60% straight (how magnanimous we are!). Eventually they will be importing from Nepal at Rs 3 and export the same to us at Rs 4.80 – reinforcing the firmly held belief in Indian politicos and bureaucracy that Nepali people are nice and, therefore, dumb (except for those who sell their souls for “a few silvers”).

An interesting thing about the “halt” is that it is Ministry of External Affairs in New Delhi that has thrown wrench in the works. It is surprising that simple export of power to Nepal requires approval of Ministry of External Affairs in New Delhi. However, hydrocracy of Nepal deems export of power normal trade (simply trading in “electron”) and they proclaim that exporting power does not have anything to do with water resources (even Supreme Court of Nepal has delivered a verdict in this line in the case of west Seti. When reference is being made to west Seti, it needs to be remembered that Nepal wasn’t importing 30 MW dedicated power from a specific project. However, west Seti it is dedicated export oriented project. What is more galling is that west Seti generates augmented flow of 90 m3/s which ends up benefiting farmers in India (can irrigate 270,000 ha land for non paddy cultivation), but the deal, even from this perspective was deemed not sharing of water resources.

This also calls on us to look at the other side of this very coin (export of power to India). Intransigent people (including those who would like to replicate Bhutan model in Nepal) dream of having India “jump” at our bidding by exporting power to her as she will be dependent on “us” for substantial amount of power from large plants – up to 10,000 MW from Karnali (and making Nepal "immensely" rich). I have pointed out the fallacy behind this belief in my article published in Nepali Times (# 314, 8-14 September, 2006) as “India is uncomfortable being dependent on an independent Nepal on such a scale. The comfort level would have gone up significantly if the security of such a project is to be guaranteed by the Indian Army.” With regard to Bhutan, being a protectorate of India, India does not feel uncomfortable being dependent on her. I hope I don’t need to overemphasize it here by saying that Indians would hate to lose sleep by having to wonder when someone in Nepal is going to switch off power from plants in Nepal exporting to India (exactly the reverse of what they have just done to Nepal suffering from chronic load shedding). In view of this, the idea of dedicated export oriented power plants in Nepal for India will never work as long as Nepal will fail to graciously accept Indian security arrangement of such plants in Nepal. I have gone on to opine in that article that “But Nepali people are famous for their “intransigence” in this matter” (Thank God!). I would like to believe that I am not off mark in this matter

Before concluding, I would like to repeat, ad nauseoum (since I have been repeating this over and over again) that Nepal’s best interest will be best served by ensuring energy security and being self reliant in the matters of energy – from our own water resource.

I would like to close here by reiterating that Indian interest in Nepal’s hydropower is just a façade to capture water belonging to Nepal – we can find abundant examples in Koshi, Gandaki and Mahakali treaties. My belief as such has been confirmed by current union water resources minister of India Mr. Saif Uddin Soz (no less a person) who has been frank and honest in admitting, with Navin Singh Khadka, BBC Nepali Service, 12 September 2008 that “Our main interest is flood control and irrigation. Those are our first and second priority. If we get hydroelectricity as by product, that will be a bonus for us.” I pray to god almighty that he gets elected once more and ascends the same ministerial berth in Delhi.

Environment, Energy and Water in Nepal

(Courtesy: Dwarika N. Dhungel)

Environment, Energy and Water in Nepal: A Key Note Address of Dwarika N. Dhungel delivered at an International Symposium on Environment, Energy and Water in Nepal: Recent Researches and Future Directions, organised in Himalaya Hotel, Kathmandu ( March 31 and April 1, 2009 ) by University of Yamanashi, Japan


1. All of you are aware that our world is facing an important environmental problem: climate change and global warming and their consequences. Nepal is not an exception to this global problem.

2. Climate change is now unequivocal. Recently the Intergovernmental Panel on Climate Change (IPCC) pointing to the recent studies announced that without decisive action, global warming in the 21st century is likely to accelerate at a much faster pace and cause more environmental damage than predicted. All sectors especially the socio-economically active sectors like water resources, agriculture, tourism, and health and areas such as biodiversity, natural disasters, extreme events etc are affected. Developed or developing, no country can escape from its impacts. Nepal is also strongly affected by the climate change, though her contribution in changing the climate is negligible.

3. Such changes are more pronounced in mountainous areas. This will accelerate the glacier melt in the Himalayas, which is projected to increase flooding, within the next two to three decades. This will be followed by decreased river flows as the glaciers recede. Freshwater availability not only in Nepal but also in the whole South Asia region is projected to decrease due to climate change.

4. In many years, there was practically no rainfall during the recently gone winter of 2008-009. We have observed the beginning of early warm season in the country. Japan's celebrated cherry blossomed early. If the trend continues, we may have to face a severe drought in the coming rainy season. Study by Department of Hydrology and Meteorology (DHoM) shows that the annual mean temperature of the country is increasing steadily at the linear rate of about 0.04oC/year. This rate is much higher than the mean global rate. The mean annual temperature has increased by 1.8°C between 1975 and 2006. Study shows that not only the mean annual temperature is increasing, but also all the seasons are warming. The rate of warming is also varied, which is higher in winter compared to the other seasons. Apart from change in mean state of climate, the changes in frequency and intensity of extreme climate events have profound impacts on nature and society.

In Nepal:

• Cool days and cool nights have decreased.
• Warm nights and warm days have increased.
• Frequency of warm spells has increased and incidence of cold spells has decreased.
  

5. With the long dry period and unusually high temperature, this winter in Nepal has brought a lot of hardships to the public. Water level in most of the rivers has decreased. The wells, tube wells and ancient waterspouts (Dhunge Dharaa) have started drying in the Katmandu Valley. This has created drinking water scarcity in the valley. A 12,000 liter tanker water now costs Nrs. 2,600 up from Nrs. 1,200. After 2006 that was marked as one of the driest winters in Nepal, 2009 winter is another similar drier winter within a span of 3 years.

6. The rivers are not only getting dry day by day, but they are also getting polluted. Due to the lack of landfill sites facility, most of the urban rivers in the country have become west dumping sites. Almost all the rivers within the Kathmandu valley have turned into very dark pool of filths, dirt and wastewater - an open sewer. They could be easily called cesspools. The morning walkers along the river banks, which I also undertake along the Bagmati River with a senior colleague, have to use handkerchiefs in their noses to avoid very bad odor. If people like us cannot face or tolerate five to ten minutes in the dirty and filthy environment along the famous rivers banks of Kathmandu, one can imagine, in what hazardous conditions people must be living on the posh bungalows and shanty huts on the banks of this river. The Pashupati Aryaghat on the bank of the River Bagmati, where pauper and prince, both are normally cremated, may be the dirtiest place and whatever drop of water is available in it, is very hazardous and contaminated. But many after their cremation would like to get a piece of their bones buried underneath the clean water of the Bagmati River at Aryghat. Therefore, one of my friends wants me to answer his query, that is, Should we not have the respect for our sacred Bagmati River? He further thinks that 'we have for over a decade, environmental laws and regulations framed with the assistance of our friends (donors). Yet the will to implement those laws are totally lacking, why? I do not have the answers to these questions of my friend.

7. 53 percent of the total population (65 percent in the urban areas and 51 percent in the rural areas) is supposed to be enjoying the piped drinking water facility. Yet people face the drinking water problem. According to the ADB (2004), it is reported that nearly 50 percent of drinking water supply schemes are not functioning as designed due to the lack of proper maintenance in Kathmandu valley. Other urban drinking water schemes also suffer from this problem.

8. Water pollution is the most serious public health issue in Nepal. Water-borne diseases such as diarrhea, dysentery, cholera and skin diseases are among the top ten dreadful leading diseases. The quality of both surface and ground water sources used for drinking water purpose is deteriorating mainly due to both natural and anthropogenic contaminations. Discharge of untreated domestic sewers and industrial effluents into rivers, and landslides, soil erosion and floods pollute the river water. The ground water in the Katmandu valley is polluted with fecal contamination. Whereas, arsenic problem is rampant in the Terai (southern plains) area. This shows that the quality of drinking water in Nepal is miserably substandard.

9. Drinking water is the basic minimum requirement of all the human beings. Access to safe and adequate drinking water is the commitment of the government. Therefore, the government needs to raise the awareness of the people on sanitation and promote, operate and maintain domestic as well as industrial wastewater treatment plants to reduce the pollution of surface water and safeguard the public health. Studies have also recommended community wastewater management treatment plants and separate treatment plants for populated institutions such as hospitals, prisons and army camps. It may be recalled that wastewater management promotes water conservation by preventing pollution from untreated discharges to surface water, groundwater and soils.

10. The demand for water is increasing due to increase in population and industrialization and the rate of ground water recharge is decreasing with increase in pavement area due to rapid urbanization. As a result the ground water aquifer is vulnerable to drying of the wells, contamination of water and possible land subsidence. Among others, the depletion of ground water table is threatening agricultural development that is the main source of GDP in the region. But let me remind you that the people in Terai and the Kathmandu valley are very much dependant on ground water. Therefore a proper sustainable management of groundwater is urgently needed.

11. More than 30 year long study of glaciers in Nepal shows the alarming rate of glacier retreat from few meters to over 30 meters in a year. The most serious impact of climate change on glaciers is the expansion of these glacier lakes and formation of new ones, posing danger of glacier lake outburst flood (GLOF). Nepal has already observed 15 GLOF events. 20 glacier lakes in Nepal are potentially dangerous.

12. The fresh water resource of the Himalayas is depleting fast affecting the water resources of both Nepal and the populous Indo-Gangetic Plain. The mighty Ganges, whose 75 percent of the flow during the three lean months is fed from the rivers flowing from Nepal, supports 42 percent of the Indian population. There is going to be increasing demand for fresh water in our part of the world.

13. The heavy precipitation events show the increasing trend. This implies the occurrence of more extremely high rainfall in future and water induced disasters such as floods and landslides are expected to be more common. There may be high possibility of increased water induced disasters in the country. Moreover, the studies on observed trend in water-induced disasters also show the increasing trend in disaster (floods, landslides and droughts) events and damage. Nepal has; therefore, to develop a comprehensive disaster management strategies and frameworks for disasters risk reduction to adjust the sudden shocks.

14. It may be recalled that Nepal is known to be one of the richest countries in water resources. With her more than 6,000 rivers, having a combined run-off of more than 200 billion cubic meters (bcm), and contributing 46% (as high as 71% during the lean season) of the flow in the Ganges has immense potential for the development of hydropower, which, if developed to the maximum possible extent, would not only fulfill the total demand of the country but also some requirements of other countries of South Asia: India and Bangladesh. The theoretical hydropower potential of Nepal's rivers is estimated to be about 83,000 mega watts (MW) of which about 43,000 MW is considered to be financially and technically feasible for exploitation. However, Nepal’s per capita energy consumption is one of the lowest in the world reflecting the low level of development and prosperity. As of March 2008, the country had exploited only 556.4 MW of hydropower (public sector: 408.1 MW and private sector: 148.3 MW) of the hydropower potential. The country is undergoing 16 hours of reeling load shedding having serious consequences in the economy. It is most likely to increase in the days to come. Despite the fact that Nepal may organize programme to celebrate 100 years of the establishment of the first hydropower plant, 500 KW Pharping power plant, in two year's time, she seems to going back to the dark days. Thus one major question that needs to be raised: Why we are undergoing the worst load shedding in Nepal's history? Have the Initial Environmental Examination and Environmental Impact Assessment laws and regulations relating to hydropower development become a burden or, a constraint? The government's recent 35 Point Agenda that has been brought to deal with load shedding problem appears to indicate that.

15. The current energy consumption scenario shows that Nepal’s energy supply is primarily based on traditional, commercial and alternative energy of which the large portion of the energy consumption (over 85%) is dominated by the use of traditional non commercial forms of energy, the biomass fuels particularly fuel wood, agriculture residue and animal dung. As population increases, and economy expands, the energy demand would also increase. Coping the increasing demand and diversifying the sources of energy are the major challenges before the country.

16. The way the present and future demands are met affects not only the environment but also the overall development. Indiscriminate use of fossil fuel is leading to global warming and climate change. Nepal, therefore, has to pursue an energy policy that ensures energy for present and future use from sources that are dependable, affordable, safe and environmental friendly. Nepal’s energy development therefore got to be guided by the following principles:

Firstly, promotion of indigenous renewable sources such as solar, wind, biomass, hydro etc.
Secondly, energy diversification as no single source is likely to fulfill all types of energy needs and dependence on one source alone is not sustainable in the long run.
Last but not the least, efficient use of energy in the production, supply and consumption stages need to be maintained.

The key to a secure energy future is the efficient and effective use of a diverse mix of energy sources. But how sustainable, without the donor support, in solar, wind and biomass for a country like Nepal needs to be seriously analysed.

17. In the light of all the facts and realities, what I personally think is that friends of scholars working on Nepal, and professionals in the subject matters covered by this symposium, should in addition to undertaking studies and researches pay attention to the following matters and provide solid analytical basis to understand the problems and undertake the measures that would address the problems:

• Find out what has been done to deal with the issues related to climate change, measures undertaken, their success or hard realities and lapses?
• Successes and lapses in controlling river pollution and contamination and growing scarcity of drinking water especially in urban areas and arsenic problem related to the ground water.
• Warning system and alertness/preparedness to deal with the GLOF burst and glacier related issues.
• Development of more non-grid based hydro projects in isolated pockets and getting them hooked to the national grid.
• Concerted and sustained effort to develop different energy sources.
  

Above all, I want to urge all of you to make an analytical study and diagnose the chronicle disease that Nepal has been suffering for a long time, i.e. Nepal is good in plan preparation but in the water and energy: no drinking water, no power, and cesspools all around. What a paradox?

Kathmandu

March 31, 2009

Arun III Project: Nepal’s Electricity Crisis and it’s Role in Current Load Shedding and the Potential Role 10 Years Hence

(Courtesy: Ratna Sansar Shrestha, FCA)

Abstract

It, has become fashionable to blame “cancellation” of Arun III project, by the World Bank in 1995, in reference to current electricity crisis, inferring that had it been implemented consumers in Nepal would not have been facing current load shedding problem. Now is time for a dispassionate and detached analysis of the two scenarios, the Arun III route and the route sans Arun III. The analysis of alternative scenarios demonstrates that the implementation of Arun III 201 MW project in 1995 would have not eliminated load shedding from 2000 onwards; in fact the power deficit would have been of a higher magnitude. Now, Arun III planning is for a new incarnation with a capacity of 402 MW, expected to be completed within next 10 years. But as the output of this proejdct has been slated for export, it, too, will not alleviate load shedding problem of Nepal.

Nepal is facing severe electricity crisis due to supply constraint and it has already been forecast that the load shedding is here to stay in the increasing magnitude. During this year’s wet season Nepal faced the problem of flood which resulted in loss of life and limb as well as property in the hilly areas and Terai in Western Nepal. Besides, the breach of Koshi embankment played a havoc in East Nepal where people got drowned (and unfortunately killed, too) and displaced, homes washed away, and farmers’ investment of time, energy and resources in the cultivation of their land washed out (in some areas even fertile land was converted to sandy “beach”). Moreover, communication network and infrastructure including road network was brought to disarray. Industries in the area also suffered due to break down of transportation system; either because of failure to access raw materials and other supplies or because of inability to supply finished product to its customers (most of the industries suffered on both counts).

In the past, Nepal Electricity Authority (NEA) used to trot out the excuse of no water in rivers whenever it came up with a new load shedding schedule or made changes in them resulting in the increased hours of load shedding. However, this rainy season, even in the abundance of water (or flood!), NEA imposed a load shedding of 2 hours each day, two days a week, till third week of August 2008. With effect from 27th August, 2008 the load shedding hours was increased to 16.5 hours/week which kept on increasing ad nauseaum. The Chief of Load Dispatch Center of NEA announced in a program in Butwal on 11th November 2008 that there will be load shedding at the rate of 10 hours/day in Marga (November-December), which will go up to 12 hours/day in Paush (December-January) and it will peak at 14 hours/day during Magh (January-February) this year[i].

Many a pages have been written wherein the root cause of Nepal’s electricity crisis has been ascribed to the cancellation of Arun III by the World Bank in 1995, scheduled to be completed in 2005. Besides the journalists of many hues, a number of luminaries have also “invested” time and energy to write on this topic, including a special chapter dedicated to this subject, forming a part of the book by a renowned economist, who has occupied the position of finance minister of Nepal a number of times over last two decades and was the first Vice Chair of National Planning Commission of democratic Nepal in 1991[ii]. It is high time to examine/analyze if there is any truth in it. Irrespective of whether there is an iota of truth in this logic or not, it is also time to draw lessons from this phenomenon so that Nepal is able to learn from this episode and undertake projects for implementation in future prudently. In other words, a dispassionate and detached analysis is called for to test if the argument attributing current load shedding problem to the cancellation of Arun III project by the World Bank is rooted to ground reality or not and find out what lessons could be learnt from this episode. This entails conducting an autopsy of this logic, as it will also be able to throw ample light on the intellect and mindset of the hydrocracy (intelligentsia, politicos and bureaucracy involved in water resource sector) in Nepal.

FOR A FULL VERSION OF THIS TEXT, PLEASE REFER TO THE FOLLOWING SITE:
http://ratnasansar.blogspot.com/2009/03/arun-iii-project-nepals-electricity.html

[i] Source: Kantipur of November 13, 2008.
[ii] Mahat, Dr Ram Sharan, 2005: In Defence of Democracy, Adroit Publishers.

New Nepal Plunged in Darkness

(Courtesy: Ratna Sansar Shrestha)

Latest Scenario

As far as the latest scenario is concerned, I am apprehensive that Nepal will have electricity crisis spanning next 10 years and further, if the relevant policies are not completely overhauled. NEA, during its anniversary celebrations, claimed that after five years, load shedding will be a matter of the history. This is not the full truth. The problem is as follows. NEA claims that another 806 MW will be generated in the next five years and there will be 1493 MW in total in the system and based on their own load forecast, the demand then will be 1271 MW (in peak season) which will lead one to jump to the conclusion that there will be surplus electricity. But in reality, 1493 MW will be the total installed capacity which can generate at full capacity only during the rainy season and it goes down to half to one third of the capacity during the dry/peak season, creating scarcity again due to short fall of 400/500 MW even if all the projects that NEA has in the pipeline are completed on time. There will be shortage of electricity in five years’ time by a higher magnitude if these projects are not completed in time, as is the general tendency.

Now that the government has set a target to generate 10,000 MW in 10 years’ time of which about 8200 MW is for export purposes and 1800 for domestic consumption, the total installed capacity for domestic consumption after 10 years will be around 2500 MW and load forecast for that year is 1900 MW; an apparent case of surplus generation. But again, there will be seasonal dearth of electricity due to the above-mentioned phenomenon. Even after addition of 10,000 MW capacity after ten years, load shedding will continue to exist. Therefore, the government needs to change its policy drastically and focus more on the hydropower development for the purposes of domestic consumption first.

In Nepal, the average electricity consumption per capita is 69 kWh per annum which in the developed countries it is around 20,000 kWh. Economy of a country is linked to the electricity consumption. Electricity can be used for industrialization, employment generation, agro processing, irrigation, cold storage, changing lifestyle and so forth. Even it can displace POL products for transportation by electrifying transportation, e.g. electric railways along east-west highway. By just undertaking Kathmandu-Birgunj railway Nepal can displace 120 thousand kiloliters of fossil fuel in a year. This can significantly reduce both trade deficit and balance of payment deficit of Nepal with India. The government is planning to construct fast track road linking Kathmandu to Terai instead of which it should have chosen electric railways in order to escape from the fossil fuel dependency syndrome.

The generation of 10,000 MW is possible only if the government can arrange to mobilize an investment of Rs 1,500 billion. It all depends on how effectively the government can lure the investors, which is not an impossible feat, though. Nepal is receiving Rs 150 billion annually from remittances from authorized sources which alone is sufficient for 1,000 MW. Therefore, 10,000 MW in 10 years can be generated from this source alone. But we don’t need to use remittance alone for the purpose; there are many domestic investors interested to invest in hydropower. Besides, there are foreign investors also interested in implementing hydropower projects. Having said this, 10,000 MW, therefore, is not beyond our reach. However, from infrastructural perspective, Nepal is not prepared for the implementation of this size of hydropower projects; we lack necessary infrastructure like access roads and transmission network. To some extent, these infrastructures will be developed by the investors as well but not all. Therefore, the government should also construct necessary infrastructures. Otherwise, the higher investment by the IPPs will be reflected in the bulk electricity tariff which ultimately affects the consumers making electricity unaffordable in this water resources rich country.

There are many people holding licenses for hydropower projects but they have not been able to implement due to lack of sufficient capital (some don’t even have fund to conduct feasibility studies). Generating one MW needs initial investment of about Rs 150 million. The government has been liberally giving away licenses to any applicant even to those without financial capability to mobilize necessary fund because of which power generation has been far less than the capacity of the licenses issued. This is a policy failure. On other hand, the NEA has been circumspect in signing PPAs which too has been creating constraint in the implementation of the power projects. Therefore, the government should ensure that the applicants have required capital before issuing licenses while NEA should sign PPAs liberally to solve the current constraint in power supply. Otherwise, the load shedding will grow year by year and will adversely impact our macro economy.

Reforms Required

Licenses should not be issued to those who are unable to mobilize necessary equity.
NEA should be liberal in signing PPAs but should implement penalty clauses against those who are unable to generate electricity in time or are more interested in peddling the PPAs.

Domestic consumption of electricity should be prioritized. The government should ensure that 100 percent of its population has access to the electricity which now is limited to 25 percent that too with load shedding. Also increase the per capita consumption of electricity which now is 69 kWh. The politicians talk about transforming Nepal into Switzerland which will be possible only by increasing per capita electricity consumption in Nepal, too. The per capita energy consumption in European countries is over 20,000 kWh. Therefore, the priority should be that in next ten years, the per capita electricity consumption will be 10,000 kWh in Nepal not that we generate 10,000 MW in ten years and export most of it and, thus forcing to continue load shedding in Nepal.

I am not averse to export of electricity but on certain conditions only. The government has the right to export its hydropower only after electrifying all Nepali households. Further the tariff of exporting and importing hydroelectricity should be comparable to each other. i am disappointed with the fact that West Seti Hydropower Project, a reservoir project, exports electricity to India at less that US 5 ¢ per kWh while NEA imports from India at US 10 ¢ per kWh. In the meantime, parts of Nepal are supplied with thermal electricity costing around US 40 ¢ per kWh. West Seti electricity should be primarily used for the development of Seti-Mahakali Region and only surplus electricity should be exported. The export policy should be such that we sell our surplus during rainy season (peak season in India) at reasonable/appropriate price.

The promised 60 MW to be provided to Nepal by India to counter power shortage during winter this year will cost NEA more than Rs 7 per unit (excluding other costs within Nepal) whereas NEA’s weighted average retail tariff is Rs 6.70 only. Therefore, these discrepancies should be resolved in the interest of the country.

The claim of government receiving revenue of Rs 250 billion by exporting 10,000 MW after 10 years is ridiculous. It will only amount to Rs 3 billion commensurate to royalty and tax rates, because the bulk of the amount will be spent in paying back the loan including interest and dividend to the investors, according to Shrestha. It is only about four to five percent that will accrue to Nepal by exporting hydropower. Many assumptions of these people are not grounded to the reality.

It is not necessary that reservoir projects cost more than normal hydropower projects. Large hydropower projects, though reservoir based, cost less than small HP plants due to scale economy. Average cost of construction comes around Rs 150 million per MW. One of the costs that is not included is the inundation or submergence. West Seti HP project inundates 3000 hectares of land including existing infrastructure, forest, wildlife etc which Nepal loses for ever but this cost is not internalized in the cost of the project which is about one billion dollars. West Seti reservoir augments the flow by 90 cubic meters per second of water during dry season which can generate Rs five billion per annum for Nepal based on the Lesotho precedent who charges South Africa $ 25 million per annum for 18 cubic meter per second. But Nepal is going to provide the augmented flow to India free of cost. As West Seti reservoir project is in the north of the Terai districts like Kailali, Kanchanpur, Banke, Bardiya, it should either be developed as a multipurpose project which can irrigate the land in these districts or India should be charged for the augmented flow.

Under Koshi Treaty the embankment was built on both sides of the river, which was breached by Koshi River due to criminal negligence in failing to conduct regular repairs and maintenance of it. With the water from the barrage, less than 7 MW power is generated in Kataiya, India. Because of the embankment breach, Nepal incurred a loss of about Rs 10 billion due to the loss of land, loss of settlement, wild life, industrial production, damage to infrastructure etc. but the loss in terms of electricity is not that substantial due to its small size. Some transmission towers were uprooted because of which Nepal cannot evacuate power from India. Until the diverted river comes back to its original course, neither the hydropower could be operated nor electricity can be imported through that part from where the NEA is said to import 40 MW of electricity until completion of its renovation.

What has been the contribution of Small HP projects?

Small HP projects developed by private sector have made substantial contribution. NEA has been building projects at the average cost of more than 3000 dollars per kW whereas private sector has been developing at less than 2500 dollars per kW. Middle Marshyangdi outrageously costs 6000 dollars per kW. Small HP projects are showing how economically can they be built compared to the big projects which are supposed to cost less due to scale economy. Another worthy effort of the private sectors is that they are able to complete their projects on time but NEA’s projects are always delayed. Even the highly acclaimed Chilime HP was delayed by five years.

ADB Putting Pressure on GoN to Raise Water Tariff

(Courtesy: Ratna Sansar Shrestha)

The vernacular daily “Kantipur” has reported on 5th January 2009 that ADB has written to GoN re tariff increase being pre-condition for ADB’s support for Melamchi Diversion Tunnel (MDT), (by a letter dated 28th December). In other words ADB is holding the construction works of MDT to ransom to fulfill its covenant related to tariff increase. It is unbelievable as the story sounds outrageous. Therefore, I am unable to believe that an institution like ADB will be part of anything as such (bullying tactic).

Moreover, it has been reported that someone in ADB has been going around claiming that the Water Supply Tariff Fixation Commission exists because of ADB and if that is true then it is more unlikely that ADB would write such a letter because this action both undermines and impairs the independence of the Commission as the decision regarding tariff is in the purview of the Commission and pressurizing GoN for the purpose doesn’t make sense.

Let’s look at it from another perspective. Multilaterals in Nepal have been recommending and implementing “foreign management” as the best panacea for improvement of public enterprises which languish due to political (and otherwise) interference and for such institutions being unable to function independently and autonomously. In this backdrop it is unthinkable that ADB will take any deliberate action as such to undermine and impair the independence and autonomy of the Commission. Therefore, I hope that the news-story is a fig of imagination of the reporter.

The reporter further goes on to portray the two of the three members of the commission as anti-Melamchi. I am sure that ADB didn’t feed this to the reporter. I have no information about the involvement of the other two members in the debate related to Melamchi. However, this scribe has been actively campaigning to solve the water supply problem of Kathmandu valley for the longer term (2 m3/s of water will not be adequate by the time this project will be completed and the rampant scarcity will persist and as it took 30 years, hopefully, to take off the first stage, it will take quite a while for the second and third stage to leave the drawing board) and also resolve electricity crisis to an extent by generating hydropower (no financial obligation on GoN and ADB for the purpose) by using the same tunnel for multipurpose Melamchi which will also benefit farmers in Terai as water in the dry season will become available to irrigate 30,000 ha in Terai without any additional investment. Moreover, with about 1 billion liters of water flowing even during the dry season in the Bagmati River (it couldn’t be called a river now as it is full of sewage) this river will have a new lease of life. This definitely doesn’t make me anti-Melamchi.

Although the experiment of the World Bank with foreign management in two prominent banks, in the name of financial sector reform, has failed very badly (after spending Rs 7 billion and 6 years), at the insistence of ADB the water utility management of Kathmandu valley has been entrusted to a foreign management team. In a period of less than a year, the new management has submitted 3 (one informal and 2 formal) proposals for the escalation of water tariff to the Commission. As ADB’s name has been linked with the water tariff increase it is worthwhile to look at the issue a little closely.

Nobody in the right mind will disagree that any enterprise, including a utility, needs to be operated sustainably. However, as water supply is an essential service and it touches upon the lives of the poor and deprived segment of the society, a utility as such should not be too focused on tariff increase in isolation as long as there are other ways of achieving the sustainability. In other words, increase of tariff should be resorted to only after all avenues for sustainable operation of the utility have been exhausted. In this respect the utility is in a position to implement various measures to operate it economically, efficiently and effectively before resorting to tariff increase.

Besides, the only ground cited for tariff increase is the inflation over last 4 years. However, the utility is ignoring the increase in its consumers by 15% over the same period due to which the consumers have been effectively forced to pay at a higher rate (pay same amount for dwindling volume of water) as the volume of water supplied by it has not changed since 2004.

I am sure everyone will agree that a tariff increase is like a bitter pill which needs to be sweetened by improving the services of the utility. Otherwise, the consumers could rise against the measure thus deteriorating the law and order situation already standing at the precipice.

Therefore, it makes no sense to take up the issue of tariff increase in isolation and stake the reputation of an institution like ADB.

“Rs 250 billion as royalty from 10,000 MW”

(Courtesy: Ratna Sansar Shrestha)

In the presence of Prime Minister Dahal last Friday, during the inauguration of 6^th AGM of CNI, Dr Shankar Sharma, former vice chair of National Planning Commission announced that “Nepal will earn Rs 250 billion as royalty of 10,000 MW even under existing law of Nepal”- (he said in Nepali “2 saya 50 arba rupaiya”). This is not correct at all. During the power summit of 2006 TN Thakur of PTC India did his best to mislead Nepali populace by announcing that Nepal can earn IC Rs 10,000 crore (NRs 160 billion) by exporting 10,000 MW electricity from plants built with Indian investment. I published an article refuting his statement in Kantipur on 13^th Kartik last year. Realizing that he wouldn’t be reading an article in the vernacular daily, I got another article published on the same vein in the Kathmandu Post on 25^th Paush last year. Then some half-wit went overboard and said Nepal will earn Rs 25,000 (250 billion) crore by exporting 10,000 MW in a program in Patna couple of months back. I earnestly hope that Dr Sharma is not inspired by these numbers.

Because, under the extant Electricity Act, 1992, capacity royalty is Rs 100 per kW and energy royalty is 2%, at the rate of which Nepal will earn a total royalty of Rs 4.9 billion only if the hydropower projects are able to achieve plant factor of 50% and sold at US 6 ¢. This number is lower by a magnitude compared to the one he has quoted. I take it that discerning readers are aware that NEA is able to achieve only 33% plant factor and in which case the royalty earning will go down to Rs 3.6 billion only.

Under the Electricity Bill the proposed capacity royalty is Rs 400 per kW and energy royalty is 7.5%, at which rate Nepal will earn total royalty of Rs 18.78 billion only at 50% plant factor. Even at the proposed higher rate for royalties Nepal’s earning from royalty will be very far from what he has quoted.

Even if Nepal was to levy 100% of the electricity sales revenue as royalty (ridiculous and impossible), Nepal will receive only Rs 197 billion – still not quite Rs 250 billion. The electricity will have to be sold at US 7.6 ¢ and cent percent of the sales proceed will have to be charged as royalty to achieve royalty revenue of the level he has mentioned. Nobody will disagree that this is a outrageous proposition and Nepal will never be able to levy royalty at this level. In other words the royalty rate will have to be Rs 8.65 per kWh (unit) in order for Nepal to earn as royalty Rs 250 billion. Under present market condition this is impossible feat.

Sometime back Professor Dr Ram Manohar Shrestha also came up with similar astounding numbers about potential royalty revenue for Nepal and I did point out his error (over estimation), which is published in my blog ( HYPERLINK "http://ratnasansar.blogspot.com/" \o "blocked::http://ratnasansar.blogspot.com/" http://ratnasansar.blogspot.com/), in order to deconstruct the myth that is being perpetuated.

Promised Respite from Load Shedding

(Courtesy: Ratna Sansar Shrestha)

On December 7, 2008, public relations director of Nepal Electricity Authority (NEA) declared that electricity users in Nepal will be facing load shedding for next 5 years. And, as NEA had proclaimed in its latest annual report, that “it is envisioned that Nepal would be power surplus by year 2013/14,” one is led to believe that the electricity users will have to suffer for the next 5 years only and after that there will be no load shedding. What a relief! In the capacity of a consumer suffering from the vagaries of the load shedding, one would wish luck to NEA so that it will be able to keep its promise.

The reason for the respite given in the annual report was the implementation of projects, totaling 525 MW by NEA and 281 MW by the independent power producers (IPPs) by 2013/14[1]. Following is the list of projects that NEA envisages to be commissioned by 2013/14:

Table 1: Projects to be commissioned by NEA by 2013/14

Similarly, NEA expects following projects to be commissioned by IPPs by 2013/14:

Table 2: Projects to be commissioned by IPPs by 2013/14

In this manner, between NEA and IPPs, Nepal’s power system will see an addition of 806 MW by 2013/14. After the commissioning of Middle Marsyangdi this month Nepal’s current total installed capacity will be 687.38 (617.38 plus 70) MW and after the implementation of the above mentioned projects, the total anticipated generation capacity in the system will be 1493.38 MW by 2013/14.

Let’s now make an attempt to examine if NEA will be able to keep the promise. According to the load forecast of NEA the peak demand in 2013/14 will be 1271.7 MW and as the total capacity in the system will be 1493 MW, superficially it would seem that there will not be any need for load shedding in that year. However, even the ordinary consumers (without understanding the technicalities of electricity generation) have come to learn the hard way that during the dry season (when the demand for power reaches its peak) hydropower plants do not generate to its full capacity. Therefore, in the promised year 2013/14, the peak demand will be 1271.7 MW while with the total installed capacity of 1493.38, NEA will be able to generate only in the order of 7-8 hundred MW during the dry season. Therefore, it is rather obvious that the promised respite from load shedding in that year is almost a pipe dream due to an anticipated shortage of over 400 MW during the dry season.

Moreover, it also needs to be remembered that commissioning of 525 MW by NEA by that year will depend on timely completion of the implementation of the specified projects. NEA, unfortunately, does not have a track record of completing its hydropower projects without incurring significant time overrun since the days of Kulekhani which becomes clear from the following table.

Table 3: Delayed commissioning of projects

Furthermore, the above table also anticipates addition of 281 MW by the private sector. For this purpose the private investors need to able to execute power purchase agreements (PPAs) with NEA. From the information available till now, no PPA has been signed with any of the projects listed above. In view of this the likelihood of adding 806 MW by 2013/14 is rather remote.

To conclude, it is absolutely clear that even if the projects anticipated to be commissioned by NEA are indeed completed, the load shedding problem will continue to dog the electricity users due to the anticipated shortfall of over 400 MW in 2013/14. If the projects included in the list fail to be commissioned in time, the magnitude of load shedding even in 2013/14 will be higher. This indicates that there is something seriously wrong at various levels like, comprehension of the problem, planning to mitigate the problem and also in the implementation of the projects.

[1] Source: Fiscal Year 2007/08 – a Year in Review of NEA.