A Power Paradox: Growth of the Hydro Sector in Nepal

Authors: Ratna Sansar Shrestha, Stephen Biggs, Scott Justice and Amanda Manandhar Gurung

Abstract
Nepal has tremendous hydropower potential yet paradoxically experiences, until recently, loadshedding of up to 18 hours daily in the dry season and has not achieved self-reliant energy security. This paper analyses this paradox by reviewing the growth of hydroelectricity sector in Nepal. It identifies four phases; the illustration of technical capacity, industrial training and early investments, major policy challenges and paradigm shiftand maturing hydropower sector.The spread of improved water mills as well as hydro installations is also reviewed briefly. The paper argues that Nepal will meet much of its projected national demand very soon (2018/19), but attaining self-reliant energy security after displacing fossil fuel is not in the horizon yet. While substantial hydro investments is in the pipeline; a strong, diverse hydro-mechanical manufacturing industry is established. But the electro-mechanical industry is non-existent.Policies have attracted substantial private investment in hydropower sector but it is not geared towards the use of electricity for overall economic development of Nepaland has yet to streamline policy with respect to lean season augmented flow of water for drinking and irrigation purposes within and outside Nepal. A more fundamental paradox is that Nepal government has yet to acknowledge these anomalies that hinder sustainable economic developments.

Keywords: Hydroelectricity, capital goods, policy, Nepal

Introduction
“The perennial electricity shortage, against a continuously rising demand within the country, has given birth to a power paradox of unrealized potential,” (The Rising Nepal, November 2014), is a statement that reflects the contradictory situation present in Nepal; a country so endowed with hydropower potential, suffers until recently, from regular power cuts for up to 18 hours a day .

As of 2011, about 63% of Nepalese households lacked access to electricity and, paradoxically, load shedding is limited to areas that have access to the electricity. Nepal is dependent on imported fossil fuel (coal and petroleum products including LPG) constituting 16.68% of the sources of energy, while electricity constitutes only 3.32% (GoN, 2017). Similarly, renewable (micro hydro, solar, wind, biogas, improved cook stove, etc.) constitute 3.03%. But dependency on traditional sources, such as biomass and animal/agro-residue, is a massive 76.9%. The concept of self-reliant energy security has three dimensions: (i) to make electricity accessible/available to all, not only for household use but also for power industries, agricultural and other activities in Nepal; ii) to drastically displace imported fossil fuel with hydropower, resulting in it becoming the source for 23% of the energy mix , iii) to move rural households away from traditional sources of energy.

Hydropower, manifesting the connection between water and energy, is not limited to Nepal, a sentiment illustrated by Gies : “This water-energy nexus has been coming into focus over the last couple years. The idea is that water and energy are inextricably linked: it takes water to make energy and energy to clean and move water”. But a recent article even deconstructs nexus debates, arguing that although “it is difficult to disagree with a vision of integration between water, food and energy systems”, not only is there little consensus about what it means in reality, as the “idea of ‘the nexus’ has been put forward by a range of proponents – each with his or her own perspectives and agendas”, but also, these debates “mask a bigger debate on resource inequality and access, contributing to social instability” . In Nepal, an activists’ group advocated to make the Melamchi drinking water scheme multipurpose – to avail 1,000 Million Litres Per Day (MLPD) additional drinking water for Kathmandu instead of just the envisioned 170 MLPD, to generate 250 MW hydropower, to rejuvenate the Bagmati River and to ensure water availability for irrigation in 40,000 hectares in the Terai in the dry season in order to harness the water, food and energy nexus . The group lobbied with several prime ministers, ministers and Parliamentary committees, with no results.

It is far beyond the scope of this paper to look at broader issues affecting water and energy policy at the national and regional level, however, we point to these policy arenas because decisions there determine the role different sizes of hydro units and distribution systems will play in future rural and broadly based economic development in Nepal. The scarcity of fresh water in the region for drinking, agricultural and industrial purposes also places renewed interest in Nepal’s water catchment, holding and release policies with regard to its own economic development and supplies to downstream users within and outside Nepal. Climate change has also highlighted long-term policy issues concerning the use of Nepal’s water resources as well as in other Himalayan countries .

And finally, the blockade by India in 2015-2016 drastically reduced the availability of petroleum products and other commodities in Nepal, highlighting the dependence on fossil fuel from India and renewed interest in alternative/renewable sources of energy, particularly electricity . Despite everything, Nepalis are still smarting from this blockade, but the state and even the public seems to be forgetting the lessons learnt from the blockade as no effort has been made towards self-sufficiency and switching of energy sources from imported to renewable generated in Nepal . In a report prepared by the Nepal Oil Corporation (NOC), the demand for petroleum products is projected to increase by 500% in 15 years with 2014/15 as base year .

The water flowing in numerous rivers and rivulets give rise to Nepal’s great natural assets, namely falling water to generate hydropower. Its history goes back hundreds of years with development of traditional Ghattas (water mill) that were traditional simple wooden-paddle water mills found along rivers and streams where the mechanical power (approximately 1-2 kW) is used for grinding grain, hulling/husking paddy, oil production and even turning large Buddhist prayer wheels . Bachmann tells the story where Engineer Akkal Man Narkarmi replaced the wooden parts with metallic ones, where the mill then becomes an “improved water mill” (IWM) and can generate electricity up to 3-5 kW (called pico hydro), sufficient for lighting and operating electric and electronic devices in isolated/remote settlements.

Also in the late 1960s with the introduction of cross flow turbines, micro hydro (5 kW to 100kW) and mini hydro (100kW to 1MW) schemes began to flourish for milling and to provide access to electricity (The Alternative Energy Promotion Centre (AEPC) is involved in its promotion inter alia by providing subsidies . Recent policy changes and accessible technology allows synchronous connection of mini hydro schemes to the national grid, enabling such schemes to generate power 24-hours a day and supply to the local and national grid. Yet, generally electricity from pico and micro hydro schemes are not supplied to the grid mainly due to transmission costs . Though the use of water for generating electricity in Nepal started in 1911, its development on a larger scale did not begin until the 1960s. Since then, Nepal’s technical, human resources and even financial capacity for hydropower development has increased dramatically.

Dr HM Shrestha estimated in 1966 that Nepal has a theoretical hydropower potential of 83,000 MW of which 43,000 MW was found economically and technically feasible . The total hydropower capacity of the grid, operated by Nepal Electricity Authority (NEA), currently is 802 MW installed capacity . It is a paradox thus, that in a country endowed with so much potential, and a history of having the knowledge of hydropower for over 100 years, local demand for electricity from the national grid far exceeds the supply from the national grid at the current consumer tariff. This excess demand led to loadshedding of up to 18 hours a day in the country, particularly in the winter months when rivers are running low.

However, we suggest that presenting the energy paradox in this way is diverting attention from a more substantive paradox, which is: despite tremendous gains in local technical and institutional knowledge and even manufacturing in the hydropower arena, why is more positive recognition not given to the growing and strong hydro sector in Nepal? For at least the last ten years Nepal has even been exporting its hydro knowledge and complete systems to diverse places such as Afghanistan, India, Laos, Pakistan and Sri Lanka. This paper does not attempt to answer this question, but rather highlight it as the more important, yet unacknowledged paradox.

There has been no loadshedding in the capital since the beginning of 2017 and Government expects that enough hydropower will soon be produced nationally to meet Nepal’s industrial and domestic demand, and its aim is to export 5,700 MW by 2021/22 (However, the end of load shedding in Kathmandu was not achieved by the ample production of Nepali electricity. Instead, it was achieved by importing 400 MW electricity from India . Furthermore, a supplementary Power Purchase Agreement was signed with India’s NTPC Vidyut Vyapar Nigam (NVVN) on May 27, 2017 to import an additional 160 MW (cumulative 560 MW). The installed capacity in NEA’s system is around 800 MW, generating a little over one-third of that in the dry season. Thus, although loadshedding stands “mitigated”, Nepal is not energy secure, nor self-reliant. Current crude estimates for electricity required “for normal economic growth scenario of Nepal is more than 6,000 MW” to achieve self-reliant energy security . Ensuring availability of electricity for the entire population would require 2,700 MW under the business as usual scenario. Additionally, Nepali industries have 700 MW of standby generators and would need nearly 1,000 MW more to operate at full capacity; it would take an additional 1,000 MW to displace LPG from kitchens; 500 MW would be needed to electrify transportation; and 700 MW to displace diesel irrigation pumps in the Terai . In this backdrop, if Nepal exports power without meeting her own demand (both unmet and latent) to saturation level, it will amount to a paradox within a paradox; continuing to import fossil fuel while exporting hydropower.

The strong diverse hydro sector has grown and developed substantial technical capabilities for manufacture of hydro-mechanical with backstopping capabilities to negotiate with aid agencies and the corporate sector, including for energy, water policies and projects. But Nepal is not capable to negotiate with powerful neighbours, manifested in treaties signed with India to date and the multiple agreements signed with developers for export-oriented projects . In light of this background, we review the history of hydropower development in Nepal and suggest four phases:

1) Technical capability illustrated,
2) Substantial industrial training and early hydro investments,
3) Major challenges in policy and paradigm shift, and
4) Maturing hydro energy sector and technology game change.

Methodology
The main method was literature review of many secondary sources and personal experience of working in the industry . This includes published and grey documents from government agencies, such as National Planning Commission (NPC), Ministry of Energy, Water Resources, and Irrigation (MoEWRI), Water and Energy Commission Secretariat (WECS), Investment Board of Nepal (IBN), NEA, AEPC, NOC, various commissions, task force and donor projects . Unravelling data from government and donor projects was particularly challenging as often projects reported on their own activities, with little reference to national or other data that put the information into a broader national perspective. Local newspapers were reviewed, as in Nepal, many of the debates around hydropower are played out in the local press. Interviews were held with key informants in the industry such as local microhydro users, manufacturers, contractors, equipment suppliers, private and community owners of equipment, members of trade organizations, relevant aid organizations and independent power producers. Major seminars were also attended. This research started with a focus on the spread of microhydro for economic uses that significantly adds value to the economy in rural areas but was then extended to include small, medium, and large hydro in the endeavour to understand/analyse the paradox of abundant hydropower potential but failure to achieve self-reliant energy security and value addition in the macro economy. We have also taken a look at the growth of local hydro manufacturing and maintenance industries. Our analysis is still partial in so many ways, for example we have made no attempt to review overall energy policy in Nepal . We have attempted to analyse the power paradox with energy security (also implying security of energy supply) as a backdrop (energy security defined as “the uninterrupted availability of energy sources at an affordable price”) (IEA). Our focus is the availability of hydropower, because hydropower will and should play the dominant role in any future national energy policy of Nepal, reducing dependence on imported and subsidised fossil fuels. Although national tariff/pricing and subsidy policies are important issues relative to overall energy security, these are beyond the scope of this paper.

Results and Discussion

Classification
The classification of hydropower is based on the installed capacity of the system. Based on conventional classification, systems under 5 kW are pico hydro , 5 to 100 kW micro hydro, 100 kW to 1 MW mini hydro, 1 to 10 MW small hydro, 10 to 50MW medium hydro and above 50 MW large hydro . But the Task Force constituted by GoN in 2009 to prepare Generation Plan to generate 25,000 MW in 20 years recommended following capacity classification:

Task Force Recommendation
Micro: < 100kW Mini: 100kW - 1MW Small: 1 - 25MW Medium: 25 - 100 MW Large: 100- 1000MW Mega: >1000 MW

Critical issues
The reasons for the lack of investment in larger-scale hydropower in Nepal are many and we do not attempt its analysis here. There are others who have looked at these issues in considerable depth . However, we include a list of issues that repeatedly come into policy debates in Nepal concerning investment in large-scale schemes.

1. Whether to invest in hydropower for local economic development and domestic consumption or for export (hydro dollars) inter alia to mitigate the trade deficit
2. Powerful government ‘hydrocrats’ dominate policy debates and control advice from alternative sources of expertise.
3. Suspicions over the political or other motives of investors and consultants (including bilateral foreign governments).
4. The interrelatedness of hydropower considerations with multidimensional uses of Nepal’s water resources especially for lean season augmented flow like water storage, groundwater replenishment, drinking water supplies, irrigation (most of which have regional implications) including flood control .
5. The lack of diplomacy and negotiating capacities in Nepal, vis-à-vis dominant donors, and representatives of bordering and other countries in the region.
6. Memories and histories of fair and unfair development of past hydropower and water resources projects.
7. A lack of agreement on the frameworks and forecasting tools used to estimate financial, economic and social costs and benefits including positive and negative externalities and rates of return on hydro projects and large dams in general including under developed stage of discipline of financial engineering, which is not fully understood by most .
8. The changing economic and technical environment for investment. For example, some hydro and water resources schemes are proposed and built using one ranking of national priorities to justify the scheme, while a few years later, another ranking of national priorities might be more relevant. In addition, once built, the actual use and outcomes of projects often changes over time . This approach creates confusion amongst the project developers making them uncertain as to which project to be undertaken/implemented on which basis and when; thereby stunting the growth of the sector as a whole.
9. Changing composition of local and foreign investors .
10. Degree of public and private ownership in different parts (generation, distribution, transmission and use) of the hydropower sector (bundling and unbundling).
11. Balance of run of the river and storage projects .

As we discuss at the end of the paper, the growth and maturing of the hydro sector has given rise to a diverse, sustainable industry where load shedding of the type experienced in recent years should be over if policy and its implementation is properly geared to meet Nepal’s own demand and ensure self-reliant energy security. The planned commissioning of the 456 MW Upper Tamakoshi project in April 2019 (after a two-year delay due to earthquake and Indian blockade) will be a significant major step in that direction for supplying the national grid .

Phases in the Development of the Nepal’s Hydropower Industry

Technical capability illustrated (1911-early 1960s)
Perhaps the most well-known example of a mini hydro is the 500 kW Pharping Powerhouse established by the Rana rulers of Nepal in 1911 AD, a gift from the British government to illuminate Rana palaces in Kathmandu and some streets. It generated electricity for 70 years until 1981 when the water was diverted to supply drinking water. It is owned by the NEA and was rehabilitated in 2006. It is operated occasionally when water can be diverted from drinking water. There are now plans to turn it into a living museum . The second oldest power station in Nepal is a 640 kW run of the river scheme in Sundarijal commissioned in 1935, about 24 years after Pharping. It has been running ever since and the water from its tailrace is supplied to the Kathmandu valley.

Industrial training and early hydro investments (Mid 1960s-1990s)
While the Pharping and Sundarijal plants illustrated well the feasibility and use of hydropower in Nepal, it was not until the mid-1960s that an interest in developing a hydropower manufacturing capability started.

The changes that have taken place in the industry since the 1970s are quite dramatic. One of the first examples of the development of hydropower for industrial use is the very well-known 1 MW Tinau hydropower plant in Butwal. The project started with a 50 kW unit to replace the diesel generator and then developed into the 1 MW system, a run of the river scheme with Francis turbine. It is important, not only for supplying electricity, but for its major role in the development of Nepal’s hydropower industry. It was started in the mid-1960s under the leadership of a Norwegian engineer Odd Hoftun and in 1972 operated by the BPC, which he incorporated. It was handed over to the NEA in 1980. Except for a time in the early 1980s when it was badly damaged by a flood, it has been in operation. Its construction was conceived not only to provide electricity to a nearby major Terai town, Butwal, but also to build up local skills and industrial capacities in the nascent hydropower industry. Odd Hoftun, supported by United Mission to Nepal (an international NGO), initiated the establishment of the Butwal Technical Institute (BTI) in 1963, which has been one of the major sources of hydro engineering training in Nepal. It now possesses a large industrial park, where many private companies are providing manufacturing and maintenance services for all sizes of operations in the hydropower industry.

By the late 1970s, the cross-flow turbines had become the most common micro hydro turbine and two private companies, the Balaju Yantra Shala in Kathmandu and Development and Consulting Services (DCS) in Butwal played important roles in its development . Odd Hoftun also established Nepal Hydro and Electric Co. (NHE) in Butwal in 1985 as a turbine workshop. It now specializes in fabrication/manufacture of hydro-mechanical equipment including High Voltage (HV) substations and repair and maintenance of electro-mechanical equipment for hydropower generation, transmission and distribution. Furthermore, the company has significant involvement in manufacture of heavy steel structures. Both the Butwal and Patan Industrial Estates were established many years ago and several of the micro hydro repair and manufacturer companies are located in these estates . Several of these units have ISO 9001 certification, and some are moving into larger repair and manufacturing capabilities .

A well-known example of a locally managed mini grid is at Namche Bazaar, the gateway to Mt. Everest. Its first project, started in 1976, was washed away by the Dig Tsho glacier lake outburst flood in 1985. A new run of river power plant, 630 kW installed capacity, with 2 double jet Pelton turbines was built on Thame Khola between 1988-1994 with Austrian Government assistance. The electricity has given light and power including for ICT to the locals, hotels and bakeries in both Namche and Khumjung VDCs including a local hospital.

Major challenges to Policy and Paradigm Shift (Early to Late 1990s)
In 1991, Nepal’s total installed capacity stood at 244MW out of which 239MW was built and owned by NEA (including a 14.41 MW thermal power plant) and 5.1 MW hydro built with Norwegian government assistance and owned by BPC

1992 is a turning point in terms of the liberalization of the hydropower sector after the formulation of the Hydropower Development Policy (1992) and the promulgation of the Electricity Act, 1992 and Water Resource Act, 1992, liberalizing the sector to ensure hydropower development by attracting private sector investment in the ‘build, own, operate and transfer’ (BOOT) mechanism. Prior to this, the hydropower was in public domain . In 1996, the AEPC was established, and in 1998 a set of policies that were favourable to the development of the smaller scale hydropower industry in Nepal was also introduced.

International donors and investors have also changed their behaviour significantly in 1990s and they are now far more open to a broader range of options, as regards to technology, management systems and investments plans in the electricity sector. Reflecting on the behaviour of donors in the mid-1990s, when civil society groups challenged, and stopped a proposed World Bank Arun 3 dam, Pandey notes: “Among the more than 40 conditionalities for donor investment into ‘Baby Arun’ , the most problematic was: Outside the investment plan, NEA could not even study a hydropower project >10 MW without donor approval” .

The debates around the 201 MW Arun 3 confrontations illustrated well the issues involved. The disagreements at the time centred on the high per MW cost of the scheme, its environmental effects, the short and long-term distribution of benefits and costs - including effects on the growth of a local hydro industry. The debates on the pros and cons of the Arun 3 dam are still much alive and continue to influence national hydro energy policy debates and current negotiations on the development of hydro on the Arun River . The debate was settled by the World Bank by refusing to fund it as IFC had, in the meantime, committed to fund 60 MW Khimti project, thereby rendering Arun 3 and Khimti projects mutually exclusive, due to negative covenant of Arun 3 project, proscribing undertaking project >10 MW.

Similarly, with the establishment of AEPC and introduction of relevant policy, there was major support from international agencies for off grid hydro systems development as reflected through the programs of the AEPC . Strong local business associations grew, like Nepal Micro Hydro Development Association (NMHDA) and Independent Power Producers’ Association of Nepal (IPPAN) to lobby and promote their business interests.

Maturing Hydro EnergySector in new Millennium (2000 – present)
The last one and a half decade has seen the maturing of the Nepal’s hydropower sector. We look at this under three headings: supply, demand and institutions.

• Electricity Supply: Nepal Hydropower Generation
At the micro and mini hydro level, according to AEPC the total installed capacity, through till 2015/16 is 54.275 MW (AEPC, 2013). There is no reason to think that this off grid source of electricity will not continue to rise rapidly. Not only is this hydropower installed using Nepali expertise and equipment, but Nepali companies are now supplying and installing hydropower in many countries in the region.

At the macro level, under new policy allowing private investment in hydropower, 488 MW was added to the system in 22 years from 1992 through till 2014 - double of what was built over eight decades. During this period (1992-2014), NEA added 238 MW (including 39 MW thermal power plant), whereas independent power producers (IPPs) implemented power projects totalling 250 MW . In 2016, total installed capacity in NEA system stood at 855.886 MW (851.25 MW in the grid and 4.536 MW isolated) . Of which NEA hydro is 477.9 MW and thermal 53.4 MW. IPP hydro in the grid is 324.446 MW. Of 117 generation licenses issued for total installed capacity of 3,340.95 MW, 50 projects with total installed capacity of 324.446 MW have been commissioned through till 2015/16, electricity from most of these is sold to NEA under power purchase agreements (PPAs) .91 IPP hydropower projects are under construction with 1,721 MW installed capacity . Similarly, by November 30, 2016, the Department of Electricity Development (DoED) issued 276 survey licenses for various sizes of projects for 5,914 MW. Additionally, 159 licenses for survey of transmission lines and 63 licenses for construction of transmission lines have been issued through till July 2017.

It is projected that load shedding in Nepal will come to an end, when the Upper Tamakoshi hydro plant (456 MW) is commissioned along with smaller hydro plants such as the 50 MW Upper Marshyangdi project . After that, with forecasts of future investments in larger and smaller projects, certain segment of society believes that Nepal will not face major loadshedding for many years to come. But Nepal would still be very far from achieving self-reliant energy security that includes switching from fossil fuels used in households, transportation, and industries to hydropower. As regards large dams, negotiations have restarted with India on the 6,480 MW Pancheshwar project on the Mahakali River that separates the two countries on Nepal’s western border. Yet, despite India’s plans to develop it, eyeing stored water for large shortfalls in municipal, industry, and irrigation in North-Central India, the likelihood of its implementation is slim as India is coveting Nepal’s share of water under the Mahakali Treaty .

Till 1990s, supply was dominated by the NEA. But, of the total 562 MW from all projects completed since 1990s, only 42% came from the NEA, the rest was generated by the private sector. Of the total generated by private sector 34.7% includes foreign investment and 65.3% is Nepali investment only. There are now a very wide variety of Nepali investors, ranging from local institutional investors, such as Employees Provident Fund (EPF), Citizen Investment Trust (CIT) to commercial banks and special purpose companies and funds. There are also many Nepali construction companies that have grown steadily since the initial years of the training and hydro manufacturing initiatives in Butwal and Kathmandu in the mid-1970s .

A relatively recent phenomenon is the emergence of Chinese suppliers in the Nepal market with inexpensive hydro technology both for micro (Forster undated) and macro hydro. Of 324 MW IPP hydropower plants in operation, Chinese suppliers account for close to 200 MW. NEA seems to prefer non-Chinese suppliers except in the Chamelia Project. Attraction of IPPs towards Chinese equipment primarily could be attributed to their competitive pricing. Only time will tell if the quality and performance of Chinese equipment is comparable to non-Chinese.

In terms of backward economic linkage benefits accruing to Nepal, it will not accrue till such equipment is manufactured/fabricated in Nepal. NHE and few other companies are capable to fabricate and supply most hydro-mechanical equipment, except for turbine runners. There are no electro-mechanical manufacturers of large generators in Nepal.

• Electricity Demand
The demand for electricity from the national grid has grown rapidly, especially during the last decade and it is fair to assume that it will continue to rise rapidly . Unfortunately, Nepal lacks a dedicated institution tasked with responsibility to project future electricity demand, currently undertaken by NEA and WECS independently and jointly by NPC and Investment Board Nepal (IBN).

These three have come up with divergent figures for future electricity demand for 2030. According to a recent study conducted by NEA, the electricity demand (system peak load) in 2029/30 has been projected to be 4,280 MW . The WECS has projected electricity demand of 11,111 MW in 2030 based on Model for Analysis of Energy Demand (MAED), for reference scenario of 7.2% economic growth. The NPC and IBN’s joint energy demand forecast for 2030, also based on the (MAED), is 10,092 MW . The latter two reports are based on studies that start out by using consumption of biomass, fossil fuel and electricity as background but ends up projecting only electricity demand without regard to fuel switching to hydropower even after a few decades. Complete displacement of firewood, animal/agro-residue with clean energy has simply not been looked into, although due to indoor pollution these cause huge human tolls. In order to address the issue of this power paradox, Nepal needs a dedicated institution to prepare energy demand projections that aims to achieve self-reliant energy security with hydropower in every facet of household and industrial activities, and policy geared for government intervention to ensure the displacement of biomass and imported fossil fuel.

Electricity consumption in kilowatt hours (kWh) per capita in Nepal stood at 128.1 kWh per capita in 2013 according to the World Bank . To put this into context, Malaysia with a similar population consumed 4,345 kWh per capita. Even states in India consume more - with Assam at 209 kWh, Manipur 207 kWh and Uttar Pradesh at 387 kWh. In 2015-16, when the demand for electricity in Nepal was 1,385.3 MW, NEA’s installed capacity was only 855.9MW only one third of which was generated in the dry season.

The excess of demand over supply has resulted in the extensive loadshedding in winter months . While there are considerable losses of electricity due to faults and inefficiency in the national grid, even if these were greatly reduced there would still be excess demand over supply at existing tariff rates. Just how much electricity tariffs would have to rise so that supply meets demand is not often discussed in the Kathmandu press. This is partly because the electricity industry is a supply led industry. Preoccupation is with the supply of the service, with minimal concern with the management of demand. This is reflected by the normal method of reporting which is by electricity supplied (e.g. xx kW, or xx MW) or by the number of domestic households served (generally calculated by the average use of electricity for domestic purposes per household). This goes for both of the public-sector institutions concerned with electricity generation and the private sector. The demand for electricity by large and small industries is rarely part of public debates . The spread of microhydro under AEPC follows the supply approach of NEA and uses the number of households connected to the local mini grid as the main indicator of performance.

There is a presumption sometimes by domestic electricity consumers that it is their right to a source of electricity, either free, or at a low price. Under such a situation, when supply does not meet demand at prevailing tariffs rates, often a range of elite capture, corruption, rent seeking, and political patronage behaviour comes in. It is beyond the scope of this paper to discuss these issues, which are common in many countries. However, it is interesting to note that the first hydropower unit established in 1911 was used only for domestic lighting for the palaces of then Rana rulers. This differed from the early days of the 1960/70s in the improvement of local Ghattas, which were used for economic production purposes.

In recent years, concern with reducing ‘leakages’ in the system and the productive use of electricity has been reflected by the NEA selling electricity in bulk to community electrification entities , which in turn retails to its consumer/members.

Paradoxically, the loadshedding of the last few years, and the recent Indian blockade has had advantages in regard to concentrating public discussion and in increasing awareness concerning the generation of electricity from national resources as well as the careful use of electricity. The large numbers of diesel and petrol generators of all sizes used during loadshedding and the blockade have not only been expensive, but have also changed perceptions concerning the supply, reliability and careful use of electricity for different purposes .

• Changes to Electricity Industry Public Sector Institutions
Alongside the development of a robust, diversified Nepali electricity supply industry there have also been many changes in government regulations, trade agreements, procedures and institutions associated with public discourses. These changes can be illustrated by events in the late 2000s and more recently.

Electricity Development Centre (EDC) was established in July 1993 under the then Ministry of Water Resources pursuant to Electricity Act, to develop and promote the hydropower sector by attracting private investment. This centre was also tasked with monitoring hydropower development work. It was renamed the Department of Electricity Development (DOED) in February 2000 . It is responsible for assisting the Ministry in implementation of overall government policies related to the power/electricity sector. The major functions of the DoED are to ensure transparency of the regulatory framework, promote and facilitate the private sector's participation in the power sector by providing "One Window" service and to issue licenses to hydropower projects and transmission and distribution networks; mainly to conduct feasibility studies and to construct the hydropower plants and to build the transmission and distribution network.

Electricity Tariff Fixation Commission (ETFC) was established in 1994 not as an independent/autonomous commission but to fix retail tariff. It has no jurisdiction over the bulk tariff at which NEA buys power from IPPs, nor has it the authority over import/export of power tariffs. With the promulgation of Nepal Electricity Regulatory Commission Act in 2017, a regulatory commission with comprehensive authority over the electricity sector will be constituted, which will supplant ETFC.

Power Transmission Company Nepal Limited (PTCNL) was registered in 2007 as a joint venture company with NEA owning 50% equity, Nepal’s Hydroelectricity Investment and Development Co. Ltd (HIDCL) owning 14%, India’s Power Grid Corporation Limited 26% and ILFS Energy Development Company Limited (IEDCL) 10%. It is responsible for developing and executing the transmission system in Nepal in order to facilitate the cross-border power exchange between Nepal and India, evacuating power from export-oriented projects under construction in Nepal and to import power from India to mitigate loadshedding in Nepal. Under its ownership, a 42.1 km section of Dhalkebar-Muzaffarpur 400 kV double circuit Transmission Line within Nepalese territory was successfully completed in February 2016.

Investment Board of Nepal (IBN) was established in 2011 “as a high-level fast track agency with the objective of facilitating the economic development of Nepal by creating an investment-friendly environment by mobilising and managing domestic as well as foreign investment” (Office of the Investment Board). In its early years it faced many challenges, including calls from the MoWRE for it to be disbanded in 2013 , essentially due to the conflict between the Electricity Act and Investment Board Act, 2010. Under the former, all electricity projects were under the jurisdiction of MoWRE. But the latter has put hydropower projects of capacity of 500 MW or more under the purview of the IBN. The IBN has signed Project Development Agreements (PDAs) for the Upper Karnali (900 MW) project in September 2014 and for the Arun 3 (900 MW) project in November 2014 . It also has three other projects under preparation for negotiations that will generate a further 1,800 MW. Sadly, both of the projects for which IBN has already signed PDAs will not resolve the power paradox, as both of these projects are export oriented.

Power Trade Agreement (PTA); a second institutional change that raised electricity sector’s profile is the signing of the Power Trade Agreement with India in 2014 . Electricity and water agreements with India have a very chequered history as has been documented elsewhere . However, what is significant about this new agreement is that it has come about within the context of a more open discourse in the public domain in Nepal. This reflects a far broader debate than in the past on the political nature of recognizing Nepal’s water and electricity resource potential in the short, and possibly and more importantly, in the long term. This is especially important for the nation to understand that such export-oriented projects will not address the power paradox within Nepal. This is well illustrated by the caution and scepticism of some writers regarding the offer to Nepal by India of a US$ 1 billion line of credit in August 2014 for hydro development. Some thought that should go towards the stalled joint India-Nepal program for Pancheshwar Multipurpose project. However, another three projects emerged from the past and led one observer to note, “whether they were truly born in Singha Durbar, or further away in Delhi” Whatever the next stages of these water and electricity negotiations, it is clear that there are now greater scrutiny of India-Nepal government proposals, agreements and actions than in the past.

An important point that needs to be kept in mind is the fact that both Nepal and India are power deficit countries. Therefore, it is surprising how these two countries can trade in power, which they do not have, except during certain hours of the day or certain season . Moreover, if Nepal is to achieve self-reliant energy security, more power than it has potential from water resources is needed, thus obviating the prospect of exporting power from Nepal.

Electricity Generation Company (EGC) was established in 2016 with paid-up capital of Rs. 300 million and authorized capital of Rs. 20 billion. 30% of its equity is owned by various Ministries and public enterprises such as the NEA (10%), EPF (10%), Nepal Telecom (10%), CIT (5%), HIDC (4%), Rastriya Beema Sansthan (2%). 17% equity will be offered to general public, 10% to locals of districts affected by hydropower projects being developed by the company, 2% to highly impoverished people. Earlier, MoE had agreed in principle to award around 19 projects that are under the DoED’s basket to this company.

Institutions of Public Discourse; a further dimension of the positive maturing of the electricity sector is the growth of journals, professional organizations, newspaper coverage and public dissent. Groups in Nepal’s water and electricity sectors, for many years, had public debates on the direction and content of government and donor policies and practices - for example, the Arun 3 confrontation of the early 1990s. However, we suggest that this ‘either/or’ debate as some participants and observers portrayed it then, has now developed into a more mature debate where serious policy analysis is done and references to well established journals are made, such as Water Alternatives, reviews of books in Studies in Nepali History and Society (SINHAS) and HYDRO Nepal. The latter journal, which in the past had mainly articles focusing on technical issues, now has articles written also from legal, managerial, and socio-economic perspectives and empirically supported historical analysis concerning past negotiations and development . Documents produced by consultants for influential donor organizations, are now less restricted than in the past, which is a healthy development and reflects also a growing maturity of aid organizations.

National Information Commission (NIC) was established in 2008 to implement the Right to Information (RTI) Act, the NIC is responsible for the protection, promotion and practice of RTI in Nepal. The NIC has played a positive role by issuing directives to the IBN to make the PDA signed for Upper Karnali Project public. In this manner, information of vital public interest has been put in the public domain and brought for public scrutiny and discourse. It is also a sign of maturity as the government was required to be transparent in its dealings in the matters of hydropower development, disallowing it to hide behind the shield of commercial deal.

Another sign of maturity of the electricity sector are the recent protests of locals and construction workers demanding a fair share of the planned benefits of hydro investment project. For example, the work of 456 MW Upper Tamakoshi Hydropower Project was held up for sometime, as the workers demanded more shares be allocated to them. In negotiations with the Nepal government, the Chairman of China’s Three Gorges Corporation, proposed that the GoN implement the resettlement and rehabilitation of the estimated 20,000 people that would be displaced by the 750MW West Seti Storage Hydropower project. GoN has not made any commitment in this respect as the project is yet to be implemented and no involuntary displacement has occurred. While policy level economic cost benefit analysis has generally underpinned government and donor policy decisions on dam investments, the selectivity and partial nature of the analysis, and whether compensations are paid is a notorious area of policy practice. The almost daily reporting in the local press on public and private projects and negotiating points concerning the hydropower sector reflects a healthy maturing of the electricity sector. Compared with only a few years ago, when powerful actors could make unsupported claims and promises and take actions, the current level of policy debates have become more technically and politically informed.

Conclusions and Policy Implications
This paper examines the Nepal power paradox. But we suggest there is a deeper paradox, namely the paradox that such a statement can be made, given the sustained development of the hydropower sector over the last few decades, and a level of policy debate in the public domain that could be an example to many other countries in the world. We reviewed the history of hydropower development in Nepal and suggested four phases in the growth of the sector.

Policy Implications
Maintaining the momentum of technical and institutional change
Perhaps the biggest policy challenge is the supply-led orientation of most analysts in the hydropower industry that has led to preoccupation with domestic use of electricity versus export, with minimal concern for broad based economic development and, importantly, attaining self-reliant energy security by displacing biomass and fossil fuel. This orientation has been found both in NEA and AEPC. Fortunately, with many new institutions opening up, the policy debates is changing. The diversity of investors in the hydropower sector has increased substantially. These are ‘game changing’ institutional and political changes that are leading to strong, diversified hydropower. The biggest challenge is to capitalize on the opportunities that are now opening.

Ramping up of technology has also favourably impacted two areas. The availability of inexpensive Chinese technology has made many commercial hydropower projects feasible. As more of such equipment is ‘tested’, there is likely to be easier and cheaper access to these . The second area of technology change is growing likelihood of trans-Himalaya transmission lines . A decade ago the Himalayas were thought to be impenetrable for such energy trade. Yet, on a visit by the Nepali Prime Minister to China in March 2016, a joint communiqué was released where “China is to provide technical and financial supports to conduct feasibility study … to develop Arun Kimathanka Hydropower Project (434 MW) and build a 400 kV trans-border transmission line that supports exchange of up to 1500 MW via Rasuwagadhi - Kerung route”, which is currently being upgraded to become Nepal and China’s preferred overland trade route and where, in other reports, China is proposing to link Kathmandu by rail . If such projects prove to be economically feasible, then Nepal doubles the list of energy buyers, including to power such rail links.

Treating hydro manufacture and construction as a capital goods industry
The second policy challenge concerns maintaining the momentum to strengthen local manufacturing and the installation of hydro. There is now a relatively strong hydro-mechanical industry in Nepal. In addition, Nepali companies are providing hydro services abroad such as in Pakistan, Afghanistan, Laos, India and Sri Lanka. One of the challenges for future policy is to balance the interests of this strong, flexible local hydro engineering industry with the challenges of outside contractors, sources of finance and the imports of generation, distribution equipment and electric appliances. Currently, as hydro-mechanical industries have produced turbine runners for projects smaller than 1 MW, the logical next level is production of such equipment for the small to medium hydro (1 to 100 MW) range. Secondly, Nepal needs to enter into production of electro-mechanical equipment (generators), perhaps, by collaborating with foreign industries.

National Energy Policy
It is beyond the scope of this paper to discuss the macro larger energy policy context in which hydropower is located, both nationally and globally. Now that Nepal is moving into a period where local electricity generation is projected to be in excess of demand under a range of tariff regimes, the case for such subsidies should be weaker . It is probable that the recent blockade by India has resulted in a change in behaviour amongst energy consumers, whereby they have switched to electrical sources of energy, and are being more careful in its use . There is a policy opportunity, not only as a result of the blockade to change Nepal’s overall energy policy but also to mitigate trade and balance of payment deficit, to displace not only fossil fuel inter alia for electrification of transportation and displacing of LPG from kitchens in near future and firewood from rural kitchens eventually.

Managing the multiple and changing value and use of water and energy resources
The fourth policy challenge concerns managing the inescapable complexity of water and energy resource use in Nepal and the changing institutions involved. This is not only at the local level, with respect to micro hydro, but also at a macro level. Many of the same issues come up, concerning water rights and electricity, sustainability and equitable distribution of cost and benefits in the short and long run. What is significant about Nepal at this juncture in time is that it has a wealth of experience in addressing these issues, and more importantly, a healthy instructional academic and political institutional context where this information and knowledge is available and enters onto policy debates. The challenge for Nepal will be how to address, manage and change the bureaucratic ‘siloes’ of existing government agencies, donor projects, NGOs, academic institutions and private/public investors. Moving on and letting ‘water flow under the bridge’ in the changing hydropower, water resources and economic context of today is difficult. In the politics of hydropower, whether it is in the political, academic or commercial arenas, water does not easily flow under the bridge! What is helping a ‘moving on’ is the growth and maturing of the hydro sector, especially in the private sector but also a renewed interest of academics and others who influence policy in the complexities of natural resource development . Policy needs to be streamlined to ensure that projects related to water and energy supply, especially the large reservoir projects are built as multi-purpose projects not only to meet increasing dry season and peak demand for electricity but also to meet ever increasing demand for water for purposes like drinking and irrigation. Trans-boundary issues also need to be addressed with reference to receiving recompense for negative externalities and sharing positive externalities.

Technology ‘Game Changers’ in the electricity sector
The fifth policy challenge concerns the huge contemporary range of engineering equipment for the generation and use of electricity. Some of this equipment changes the way electricity is thought about and used. A few years ago, it would have been unthinkable for a family in the mountains to speak to a migrant worker abroad. Now it is not only possible, but also normal, as a result of a mobile phone, recharged, for example, by a very small solar electricity unit on the top of the house. The change from incandescent bulbs to CFLs and now to LEDs greatly reduces usage and makes the saved electricity available for other uses. Similarly, the price of solar electricity has fallen significantly and is only now coming into a price range where it can be considered economically viable for irrigation purposes. More efficient induction cookers, which have spread recently due to the Indian blockade, increased the demand for electricity. The recent very rapid spread of the Chinese battery powered three-wheeler ‘baby taxis’ mainly on the Terai is an example of some of the major technical changes concerning electricity that are now taking place. It estimated that there may be as many as 10,000 of these three wheelers on the Nepal Terai . New (and old) equipment and knowledge for the careful use of electricity for water management in domestic and economic situations is getting more policy attention in Nepal. The challenge for policy analysts is to develop cost effective methods to keep up and learn from rapid changes already taking place on the ground. Further policy and other interventions should be expected for introduction of additional game changer technologies like cable car, ropeways, electric trolley buses, electric train in the valleys and plains, and electric and hybrid vehicles for urban..

Managing political risk
Finally, from a policy perspective there is the ever-present issue of how to manage risk . The April 2015 earthquake in Nepal highlighted risks associated with different patterns of hydropower development. The damage to dams and other physical infrastructure were some of the more obvious physical outcomes of the earthquake. However, other risk considerations concern the room for manoeuvre for Nepali policymakers in a context of powerful neighbours and donors, in an ever-changing global, economic and technological environment. The deep economic effects of the Indian blockade from 2015 to 2016 emphasized the risks to Nepal of low investment in hydro capability before the 1990s – although the technical feasibility of hydropower generation and use had been well demonstrated in 1911. We suggest that if the current trends in the development of the hydro sector continue on to self-reliant energy security, Nepal will be much less vulnerable to political risks in the future.

_ _

Ratna Sansar Shrestha, FCA Independent researcher, Chairperson of Nepal Hydro & Electric Ltd. and visiting faculty of School of Engineering, Kathmandu University
Corresponding E-mail: ratna.sansar@gmail.com

Stephen Biggs is Research Associate at Department of Development Studies, SOAS, University of London, WC1H 0XG, UK.

E-mail:biggs.s@gmail.com

Scott Justice is Agricultural Mechanization Specialist at CIMMYT, Nepal

E-mail:s.justice@cgiar.org

Amanda Manandhar Gurung is Executive Director at Chandra Gurung Conservation Foundation, Kathmandu, Nepal.

E-mail:amandamgurung@gmail.com

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World Databank (2016) World Development Indicators. The World Bank Group. http://databank.worldbank.org/data/reports.aspx?source=2&type=metadata&series=EG.USE.ELEC.KH.PC# Retrieved on 12 May 2016.

Published in July Issue of Hydro Nepal Journal

जलश्रोतसंगै सार्वभौमसत्ताको दोहन

नेपालमा प्राकृतिक श्रोतकोरुपमा पेट्रोलियम पदार्थ, हिरा जस्ता बहुमूल्य पत्थर, सुन जस्ता बहुमूल्य धातु इत्यादिका खनिजहरु अहिलेसम्म पाइएको छैन, पाइने सम्भावना न्यून छ । तर प्रकृतिको वरदानस्वरुप नेपालले प्रचुर मात्रामा जलश्रोत पाएकोछ, जसको समुचितरुपमा दोहन भएकोछैन । जलश्रोतले नेपालको समृद्धिको भाग्यरेखा कोर्न सक्छ । जलश्रोतबाट विद्युत उत्पादनको अतिरिक्त यसको समुचित दोहनबाट खानेपानी सुरक्षा र खाद्यान्न सुरक्षा हासिल हुन्छ भने जलमार्गपनि “निर्माण” गर्न सकिन्छ ।

तर भारतसंग द्विपक्षीय सन्धी सम्झौता अन्तर्गत जलश्रोतको दोहन गर्दा नेपालको सार्वभौमसत्तामा पटक पटक आँच आएको छ । साथै लगानीको सुरक्षाको प्रश्नले गर्दा पनि सार्वभौमिकतामा आघात पर्ने अवस्था छ ।

“अन्तरराष्ट्रिय” नदी
कोशी, गण्डकी, कर्णाली र महाकाली जस्ता नदीहरु चीनमा उत्पत्ति भएर नेपालबाट भारत र बंगलादेश हुँदै बंगालको खाडीबाट हिन्द महासागरमा समाहित हुने हुनाले कतिपयले यी नदीहरुलाई “अन्तरराष्ट्रिय” नदी भन्छन् । भारतमा यी नदीहरु धेरै उचाइबाट नखस्ने हुनाले यसबाट भारतमा ठूलो परिमाणमा बिजुली उत्पादन हुंदैन । थोरै उचाइबाट कम क्षमताका जलविद्युत आयोजना निर्माण सम्भव छ ।

वास्तवमा भारतले नेपालमा यी नदीहरुबाट बिजुली भन्दा धेरै पानी चाहन्छ, सुख्खायाममा थप÷नियन्त्रित पानीबाट उत्तर प्रदेश, बिहार र बंगालमा सिंचाइ गर्नका साथै पानीको प्यास मेट्न सप्त कोशी उच्चबाँध, कर्णाली चिसापानी, पञ्चेश्वर जस्ता आयोजना निर्माण गरेर वर्षातको पानी नेपालमा भण्डारण गर्न चाहन्छ, जसबाट भारतमा बाढी नियन्त्रण पनि हुन्छ ।

साथै भारत यी नदी दोहन गरेर बाह्रमासै जलमार्ग पनि सञ्चालन गर्न चाहन्छ गंगा नदीलगायतमा । नेपालका समकक्षीलाई भारतीय प्रधानमन्त्रीले जलमार्गबाट “सागरमाथा” र सागर जोड्ने सपना देखाइसकेकोछ । यसकोलागि नेपालका खोंचहरुमा बाँध बाँधेर नेपालका उपत्यकाहरुमा वर्षातको पानी संचय गर्नुपर्ने हुन्छ, जुन भारतको उत्तर प्रदेश, बिहार वा बंगालमा सम्भव छैन । स्मरणिय छ, नेपालमा यस्ता संरचना निर्माण गरिए नेपालको भूभाग डुबानमा पर्छ र स्थानिय बासिन्दा विस्थापित हुन्छन् । डुबानमा परेका जमिनबाट उत्पादन हुने कृषि उपज र वन पैदावार आदिबाट नेपाल बंचित हुन्छ, दशकौंसम्म ।

भारतका तत्कालिन जलश्रोत मन्त्री सैफुद्दिन सोजले भनेका थिए्, नेपालका नदीहरुबाट भारतको पहिलो प्राथमिकता बाढी नियन्त्रण र सिंचाइ हो, जलविद्युत बोनस मात्र । त्यसैले भारत नेपालमा जलाशययुक्त आयोजनाहरु बनाउन चाहन्छ । अनि चाहन्छ यी आयोजनाहरु पनि बिद्यमान कोशी र गण्डक बाँधकै अवधारणामा बनाउन ।

कोशी र गण्डक सम्झौता अनि बाँधहरु
“बिहारको शोक” कहलिएको कोशी नदी नियन्त्रण गर्ने उद्देश्यले सन् १९५४ अप्रिलमा सम्पन्न कोशी सम्झौता १९६६ डिसेम्बरमा संशोधन गरिएको थियो । यसको प्रमुख उद्देश्य थियो बिहारमा वर्षामा बाढी नियन्त्रण गर्ने र बांकी ८ महिना जति सुख्खायाममा सिंचाइबाट खाद्यान्न उत्पादन र उत्पादकत्वमा अभिबृद्धि । १९५८ बाट शुरु भएको बाँध लगायतको संरचनाको निर्माण १९६२ मा सम्पन्न भएको थिया ।

सम्झौताको धारा ३ मा यी बाँध लगायतका संरचनाहरु रहेको नेपालको भूभाग भारतको नियन्त्रणमा रहने व्यवस्था छ र अद्यापि भारतको नियन्त्रणमै छ । यो सम्झौताको अवधि १ सय ९९ वर्षको हुनाले यो भूभाग अर्को एक शताब्दी भन्दा बढी समय भारतको नियन्त्रणमा रहन्छ । अर्थात ५० वर्ष देखि नेपालको यो भूभागको सार्वभौमसत्ता भारत अधिनस्थ थियो र अर्को एक शताब्दी भन्दा बढी समय यो भूभागको सार्वभौमसत्ता भारत अधिनस्थ रहन्छ ।

यो संरचना निर्माण गरिएर भारतको बिहारमा २१ लाख हेक्टरमा बाढी नियन्त्रण हुन्छ, जसको लाभको मूल्यांकन हुनसकेको छैन । अनि यहि बाँधबाट उत्पादन हुने पानीबाट भारतले १३ लाख २१ हजार हेक्टरमा सिंचाइ गर्दछ । अफ्रिकि देश लेसोथोले दक्षिण अफ्रिकालाई १८ घनमिटर प्रति सेकेन्ड पानी आपूर्ति गरेर वार्षिक अढाइ करोड अमेरिकि डलर भुक्तानि पाएको आधारमा भारतले सिंचाइको लागि कोशीको पानी उपयोग गरेबापत वार्षिक ६१ करोड डलर (विद्यमान विनिमय दर अनुसार वार्षिक ६६ अर्ब रुपैया) नेपाललाई भुक्तानि दिनुपर्ने हुन्छ । जुन आज पर्यन्त गरिएको छैन ।

उक्त बाँधले नेपालको ९ हजार ८ सय हेक्टर भूमि डुबानमा परेकोछ भन् ३३ हजार हेक्टरमा जलजमाउ हुन्छ । यसकारणले नेपाल कृषि उपज, वन पैदावार आदिबाट बंचित भएको छ बिगत ६ दशक देखि र अर्को १ शताब्दी भन्दा बढी स्थिति यहि रहनेछ । यसरी बंचितिकरण परेकोबाट नेपाललाई हुने घाटाको आकलन हुन सकेको छैन । यस अतिरिक्त उक्त बाँधको कारण हरेक वर्षातको मौसममा नेपालका थप कृषियोग्य जमिन र वनजंगल डुबानमा पर्छ, अनि स्थानिय बासिन्दा विस्थापित हुन्छन् । यस्तो नोक्सानको आकलन भएकोछैन ।

अहिले मध्य वर्षातमा बाढी उत्कर्षमा छ । तर यो बाँधको ५६ ढोका मध्ये आधा पनि खोलिएका छै्रनन् । बाढीले ताण्डव मच्चाएइरहेको छ ।

हुन त उक्त बाँधको पानीबाट भारतको कटैयामा उत्पादिन ६ मेगावाट जति विद्युत नेपालले पाएको छ भनिन्छ जसको मूल्य साढे १७ लाख डलर जति हुन्छ (१९ करोड रुपैया जति) । तर यो लाभ भारतले वार्षिक ६६ अर्ब रुपैया बराबरको सिंचाइमात्रैबाट पाउने लाभको तुलनामा नगण्य हो । बाढी नियन्त्रणबाट हुने लाभको आकलन गरिएकोछैन ।

गण्डक सम्झौता र बाँध पनि यस्तै छ, एउटा अपवाद बाहेक । गण्डक सम्झौतामा कुनै अवधि नतोकिएकोले गण्डक बाँध लगायताका संरचना निर्मित भूभाग भारतको नियन्त्रणमा अविछिन्न कालसम्म रहने छ । अर्थात गण्डक बाँध लगायतका संरचना रहेको भूभागको सार्वभौमसत्ता अनन्तकाल सम्म भारतको नियन्त्रणमा रहने भयो ।

यी दुबै बाँध द्वि–राष्ट्रिय सम्झौता अन्तर्गत निर्मित हुनाले नेपाल र भारतले संयुक्तरुपमा संचालन गरिनुपर्ने हो । तर त्यसो हुन नसकेकोले नेपालको सार्वभौमसत्तामा आँच आएको हो । नेपालको सिंचाइ विभागका अनुसार कोशी बाँधलगायतको संरचनाकोलागि ९ हजार हेक्टर र गण्डकीकोलागि ५ सय हेक्टर भूमि भारतको नियन्त्रणमा छ ।

कर्णाली चिसापानी बहुउद्देश्यिय आयोजना
यो विषयको अर्को पाटो हो कर्णाली चिसापानी बहुउद्देश्यिय आयोजना, जुन अहिलेसम्मपनि कार्यान्वयन गरिएकोछैन । यो आयोजना कार्यान्वयन गर्न भनेर सन् १९८० को दशकमा ४ सय भन्दा बढी विद्यार्थी छात्रवृत्तिमा भारतको रुड्की कलेजमा इन्जिनियरिंग अध्ययन गर्न पठाइएकामा ती मध्ये धेरै अहिले सेवानिवृत्त भैसके । तर पनि उक्त आयोजना कार्यान्वयनमा आएको छैन । यस सम्बन्धमा कुनै आधिकारिक अभिलेख छैन । तर तत्कालिन राजा वीरेन्द्रले नेपालको सार्वभौमसत्तामा आँच आउने देखेरे यो आयोजना अगाडी नबढाउने निर्णय गरेका थिए, जसको कुनै अभिलेख उपलब्ध छैन ।

यस सम्बन्धमा भारतका तत्कालिन बिदेश मामिला सचिव जगत मेहता भनाई मननीय छ । उनका अनुसार भारतले यो आयोजनामा आफ्नो सुरक्षा संवेदनशीलता हुने हुनाले यसको सुरक्षा भारतले गर्न पाउनु पर्ने दावी गर्दा नेपालको सार्वभौकितामा आँच आउने महसूस गरिएको थियो । यो कुरा उनले आफ्नो एक लेखमा समाबेश गरेका छन्, जुन अब्जर्भर रिसर्च फाउन्डेशन नामक संस्थाले प्रकाशित गरेको पुस्तकमा समाबिष्ट छ ।

भारतीय पूर्वसचिव मेहताको भनाइबाट के प्रष्टिन्छ भने भारत नेपालमाथि निर्भर हुन चाहंदैन । नेपालको नियन्त्रणमा रहे “नेपालले कुनै पनि बेला विद्युत आपूर्ति बन्द गर्नसक्छ, जुन भारतको लागि सुरक्षा संवेदनशिलताको कुरा हुन्छ” । यस परिप्रेक्षमा नेपालमा आगतमा निर्माण हुने आयोजनाहरुमाथि भारत निर्भर हुने अवस्थामा भारतले आफ्नै सुरक्षाकर्मी परिचालन गर्ने छ, कोशी र गंडकीमा गरे झै अनि कर्णाली चिसापानीमा गर्न खोजे झै ।

लगानीको सुरक्षा
राष्ट्रिय सभाका वर्तमान सांसद राधेश्याम अधिकारीले “यो साता” नामक पत्रिकामा “कर्णाली आयोजनामा माओवादी नीति” शिर्षकमा जनवरी २०१० मा प्रकाशित लेखमा “भारतले आफ्नो लगानी सुरक्षित गर्न आवश्यक सुरक्षा आफैले गर्नुपर्ने प्रस्ताव पेश गर्नसक्छ । शक्ति राष्ट्रहरुद्वारा यस्ता प्रस्ताव राख्नुलाई अस्वाभाविक भन्ने गरिंदैन” भनेकाछन् ।

मतलब भारतले नेपालमा कुनै आयोजनमा लगानी गर्ने भएमा त्यो आयोजनामा भारतले आफ्नै सुरक्षाकर्मी परिचालन गर्ने चाहना राख्नु “अस्वाभाविक भन्ने गरिंदैन” र भारतलाई आफ्नो सुरक्षाकर्मी परिचालन गर्न दिनुपर्छ ! यस्तो अवस्थामा नेपालको सार्वभौकिता, स्वाधीनता र राष्ट्रियतामाथि आँच आउने कुरा सांसद अधिकारीलाई ठूलो कुरा रहेनछ !

सांसद अधिकारीले नेपाली कांग्रेसको प्रतिनिधित्व गर्छन् । अब प्रश्न उठ्छ, यो उनको व्यक्तिगत अभिव्यक्ति हो कि, उनले प्रतिनिधित्व गर्ने दलको धारणा पनि यहि हो ? साथै महाकाली सन्धी सम्पन्न गर्न तत्कालिन एमाले दल पनि सक्रियतापूर्वक लागेका थियो र वर्तमान प्रधानमंत्रीले उक्त सन्धीको पक्षमा पैरवी गरेका थिए । अब प्रश्न उठ्छ के सत्तारुढ नेपाल कम्निस्ट पार्टी र यसका पदाधिकारीहरुको धारणा पनि यस्तै हो ?

यदि पञ्चेश्वर आयोजना कार्यान्वयनमा गए के महाकाली नदीको पूर्वी किनार, जुन नेपालको भूभाग हो, मा निर्माण हुने पावरहाउसमा भारतले आफ्नो सुरक्षाकर्मी परिचालन गर्छ ? किनभने यो आयोजनाले उत्पादन गर्ने विद्युत भारतले आयात गर्छ र भारत सुरक्षा संवेदनशीलताको कारणले आफ्नै सुरक्षाकर्मी परिचालन गर्न चाहन्छ । यसो भएमा नेपालको सार्वभौमिकतामा यहाँ पनि आँच आउने हुन्छ ।

अरुण ३ लगायतका बैदेशिक लगानीका आयोजनाहरु
भारतीय कम्पनी सतलज जलविद्युत निगमको लगानीमा अरुण ३ आयोजना नेपालमा निर्माण हुनै लागेकोछ । के त्यसो भए सांसद अधिकारीको सिद्धान्त अनुसार भारतले यो आयोजनामा पनि आफ्नो सुरक्षाकर्मी परिचान गर्छ ?

भारतलाई यस्तो सुविधा दिएको अवस्थामा समानताको सिद्धान्तको आधारमा अन्य देशहरुलाई पनि आआफ्नै सुरक्षाकर्मी परिचालन गर्न दिनुपर्ने हुन्छ र बिदेशी लगानी आकृष्ट गर्ने नाममा नेपाल त बिभिन्न देशहरुका सुरक्षाकर्मीहरु परिचालित भएर बैदेशिक सुरक्षाकर्मीहरुले चलखेल गर्ने देश हुन पुग्छ, यदि अधिकारी सिद्धान्त कार्यान्वयन भएमा !

सार्वभौमसत्ताको अक्षुण्णता
नेपालको क्षेत्रफल झण्डै १ लाख ४७ हजार २ सय वर्ग किलोमिटर छ । जसमध्ये सीमावीद बुद्धिनारायण श्रेष्ठका अनुसार भारतले ६ सय वर्ग किलोमिटर भन्दा बढी सीमा मिचेकोछ । कोशीमा ९० वर्ग किलोमिटर र गण्डकमा ५४ वर्ग किलोमिटर भारत अधिनस्थ छ । यसरी अहिल्यै झण्डै १ हजार वर्ग किलोमिटर नेपालको भूभागको सार्वभौमसत्तामा आँच आएको छ । यो क्रमलाई भंग नगरे जलश्रोतको द्विराष्ट्रिय दोहन र बिदेशी लगानी सुरक्षाको नाममा नेपालको सार्वभौमिकता खुम्चिंदै जानेछ ।

एकातिर नेपाललाई प्रकृतिको वरदानस्वरुप प्राप्त जलश्रोतको भारतको लागि दोहन गर्दै यसको क्षमता निख्रिंदै जान्छ भने संगै नेपालको सार्वभौमसत्तापनि खुम्चिंंदै जान्छ । यहि गति र मति रहे नेपालको जलश्रोतको सम्भाव्यता सकिंदासम्म सार्वभौम भूभागपनि थोरै मात्र बाँकी रहनेछ ।

अबको बाटो
यस सम्बन्धमा नेपालका नीतिनिर्माताहरु बेलैमा सचेत हुन वान्छनिय छ । तर भनाइको तात्पर्य जलश्रोतको दोहन नै गर्नु हुन्न वा अन्धराष्ट्रवाद अवलम्बन गरिनुपर्छ भन्ने हैन । आवश्यकता छ, मध्य मार्गको । नेपालको जलश्रोत नेपालको लागि दोहन गर्ने र सार्वभौमिकता पनि अक्षुण्ण राख्ने ।
Ratna Sansar Shrestha

२०७५ साउन २४ गते नागरिकमा प्रकाशित

Security Ramifications of Harnessing Water Resource

Nepal is not endowed with natural resources like fossil fuel, minerals, etc. However, nature’s best gift to Nepal is water resources, which has yet to be properly harnessed. Harnessed properly, it can draw Nepal’s lifeline leading to prosperity. Water resource is important not only from the perspective of generating hydropower but also from the perspective of water supply for drinking and sanitation, to irrigate agricultural land for increased agricultural production and productivity as well as for animal husbandry, fisheries, recreation, navigation, etc.

However, harnessing water resource at bilateral level with India is seen to be fraught with security ramifications. Bilateral exploitation of water resource with India has compromised Nepal’s security at several levels due to transboundary nature of rivers. Then there is question of security of foreign investment.

Transboundary Rivers
India cannot generate much hydropower from rivers that flow from Nepal to India for lack of head (only low head projects are possible in India on these rivers). In reality, India hankers after stored water much more than electricity due to high population growth for drinking and sanitation and for irrigation to increase food crop production to feed over a billion mouths. Besides, India hopes to control flood in UP, Bihar, West Bengal, etc. by building dams in Nepal. Electricity to be generated by these is secondary for India. The then Indian water resource minister Saifudin Soz has admitted in September 2008, “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.”

Therefore, India plans to have rivers in Nepal harnessed by having reservoir projects built, like Koshi High Dam, Karnali Chisapani Dam, Pancheshwar project, etc. and her wish is to have them implemented in the format of Koshi and Gandak barrages, which are analyzed below to throw light on their security ramifications.

Koshi Agreement and the Barrage
Koshi Agreement was signed on April 25, 1954 between Governments of Nepal and India and it was amended on December 19, 1966. India wished to construct a barrage to tame Koshi River, known as “sorrow of Bihar” at that time and the basic objective of signing the agreement was to control flood in Bihar and to irrigate land therein and other lower riparian areas. Construction of the barrage was begun in 1958 and completed in 1962.

Security ramification of the agreement lies in Article 3 of Koshi Agreement, Subtitle of which is “Authority for Execution of Works and Occupation of Land and other Property”. The word “occupation” has been used unabashedly. It is stipulated in this Article that Nepal “shall permit the occupation, for such period as may be necessary of all such lands and places as may be required for the proper execution of the Project.” The project area of Koshi barrage is still under Indian “occupation”. It impinges national security as well as sovereignty, nationality and independence of Nepal. As the term of the Agreement is 199 years, according to Article 16(i), such “occupation” will last for more than another millennium!

This barrage submerges Nepal’s territory and forces displacement on local inhabitants every monsoon. Simply because India doesn’t open gates on the barrage, which, although in Nepali’s territory, is under Indian control, even when Koshi River is flooded. Of 56 gates hardly a few are opened even when flood crests the barrage. India “obliges” Nepal after repeated requests to open less than half of the gates.

As a result of late king Mahindra’s effort, Koshi Agreement was amended in December 1966. After its revision the title of Article 3 was changed by replacing word “occupation” with “use” [“Authority for Execution of Works and occupation use of Land and other Property”]. However the provision related to it was not tampered (with regard to occupation) and it was refurbished a little. Revised provision has retained the world “occupation”. Post revision, the provision reads: Nepal “shall permit the occupation, for such period as may be necessary of all such lands and places as may be required for the proper execution of the Project respective constructions.”

After construction of this barrage flood is controlled in Bihar in 2.1 million hectare, the value of which has not been worked out. Similarly, 1,321,000 hectare is irrigated in India and its value to India, based on Lesotho formula (25 MUSD/year for 18 cumecs) comes to 611 MUSD/year. While Nepal has borne the opportunity cost of submerged 9,807 ha land and water logged 33,000 ha land, the value of such loss to Nepal has not been calculated. Similarly, Nepal also suffers loss due to involuntary displacement. Only benefit to Nepal is about 6 MW power, value of which comes to 1.75 MUSD/year.

Gandak agreement and barrage
Gandak agreement was signed on December 4, 1959 (revised on April 30, 1964) to control flood in lower riparian area in India (the barrage is built at the border between Nepal and India) and to irrigate agricultural land, similar as under Koshi agreement. The barrage construction, envisaged by the agreement, was completed in 1968, which was started in 1963. Security ramification of this agreement lies in Article 6 of Gandak agreement, which is related to “Ownership, Operation and Maintenance of Works”. There is provision for “all works connected with the Project in the territory of Nepal will (to) remain the property of and be operated and maintained by the Government of India.” As the agreement stays in force for an indefinite period, the project is to be “operated and maintained” by Government of India (GoI) for indefinite period. A case of territory of a sovereign country under control of foreign nation for indefinite period, which impinges Nepal’s security as well as sovereignty, independence and nationality.

Like Koshi barrage, Gandaki barrage too is not opened to allow floodwater during monsoon with the same effect: submergence and involuntary displacement in Nepal.

Project implementation modality
Koshi and Gandak projects are not under BOOT (build, own, operate and transfer) modality. These are bilateral projects of the governments of Nepal and India, financed by India. However, full control is exercised solely by India in the territory of sovereign Nepal. Nepal has no say in the operation and maintenance of these projects. This arrangement impinges Nepal’s sovereignty. Since these two barrages are bilateral projects, these should have been operated and maintained jointly.

Karnali (Chisapani) Multipurpose Project
Over 400 students from Nepal were sent to Roorkee College in preparation of implementation of Karnali (Chisapani)) multipurpose project in 1980s (its installed capacity is 10,800 MW) with Indian collaboration. But it has yet to be implemented. There is no official notation/record in this respect. However, unofficially it has been learnt that late king Birendra decided to shelve the project after learning that India planned to deploy Indian security force in the project area.

It can also be deduced from the writing of Jagat Mehta, former Indian external affairs secretary too. He has written that “Stray suggestions such that Karnali would be of such vital importance for India that it might have to be protected by Indian security forces only deepened the apprehensions that cooperation with India could jeopardize Nepal’s sovereignty” in his paper titled “India-Nepal relations: a victim of politics” included in the book titled “India-Nepal Relations – The Challenge Ahead”, published by Observer Research Foundation in 2004. This statement reflects fear psychosis on the part of India. India doesn’t wish to be dependent on Nepal and is apprehensive that Nepal too can, for example, shut off electricity supply to India.

India has never formally broached the idea of deploying Indian security force in Nepal’s territory, but it has already done so in Koshi and Gandak barrages. In similar manner she is highly likely to do so in future projects.

Security of investment
Nepal’s current federal MP Radheshyam Adhikari, representing Nepali Congress and Bibeksheel Sajha party, in Upper House had opined in January 2010 that “India can propose to deploy her own security force to protect her investment in Nepal” and he didn’t deem such proposal unnatural, in an article published in a vernacular weekly named “Yo Sata”.

By extension every country that invests in Nepal will be entitled to same security facility. This amounts to issuing rain cheque to all countries that invest in Nepal to deploy their security force to protect their investment. While Nepal is endeavouring to attract foreign investment, if this kind of concept is to become policy, foreign security force will swarm Nepal.

Important question that begs answer is, does this statement reflect policy of Nepali Congress party that he represents in the parliament (including Bibeksheek Sajha party)? Moreover, it raises another question: do other political parties of Nepal also subscribe to this idea of his? Nepal Communist Party is in the government now and one wonders if NCP too is agreeable to this sentiment! One cannot forget that NCP was instrumental in signing Mahakali treaty with present PM Mr KP Oli being one of the main protagonists. Will Indian security force be deployed in the powerhouse of Pancheshwar project that will be located in the east bank of Mahakali River (in Nepali territory)? As India plans to use Nepal’s share of electricity generated by this project, she will become dependent on this project and India doesn’t like being dependent on Nepal.

Arun 3 to be implemented by SJVN
Sutlej Jan Vilyui Nigam (SIVN), an Indian company, is investing in Arun 3 project. Going by the logic of Adhikari India will have right to deploy her security force in this project too, impairing sovereignty of Nepal in its project area.

If Adhikari “doctrine” is to gain currency, Nepal will become pockmarked with projects where foreign security force will be deployed. With every water resource project implemented with foreign investment, a little bit of Nepal’s sovereignty, independence and nationality will be impinged.

Conclusion and recommendation
Bilateral projects implemented jointly with India have impinged Nepal’s sovereignty. India wants to implement more of such projects in Nepal for flood control and irrigation in India. Nepal now has “immense” water resource, mostly untapped. Continuing with current trajectory of policy and practice of bilateral “development” will mean Nepal’s water resource will be used up for benefit of India and Nepal's sovereignty, independence and nationality will further get undermined.

Nepal’s policy makers need to do introspection if Nepal should allow India to implement projects in Nepal in the manner of Koshi and Gandak barrages. Government of Nepal needs formulate clear and specific policy with regard to security ramification of harnessing water resources in order to ensure that Nepal’s sovereignty, independence and nationality is not compromised.


Presented at the seminar organized by Association of Former Career Ambassadors of Nepal on June 29, 2018 and published in TelegraphNepal on July 1, 2018

Nepal’s electricity to force India to kneel

Some Nepali dream of bringing India to her knees by simply switching off supply, after she becomes dependent on Nepal’s electricity! Their idea is for Nepal to export electricity to India to make her dependent on Nepal. There are others that attribute Bhutan’s “prosperity” to her export of electricity to India!

India becoming dependent on Nepal
The first school of thought believe that in the way India almost succeeded to force Nepal to her knees by imposing 6-month long blockade in 2015, in the wake of massive earthquake, Nepal too can turn the table on India by using electricity. Wickedly noble thought! Just switch it off to force India to kneel. From juvenile perspective this sounds plausible.

In the aftermath of Indian blockade on Nepal from 1988, the then Nepal’s Prime Minister Krishna Prasad Bhattarai did succeed to have India lift the blockade in 1990 by figuratively falling on his knees in Delhi. He even declared Nepal’s rivers common. Had he not been defeated in the general election, he would have concluded a treaty with India stipulating as such!

In this context, prime minister KP Oli turned out to be an exception, since he refused even to visit India till the blockade was lifted.

Indian fear psychosis
Not so surprisingly it is true that Indian rulers are apprehensive that if she were to become dependent on Nepal, she could be in trouble. Due to this fear psychosis she continues to exert control over structures built in sovereign Nepal as exemplified by barrages built on Koshi and Gandaki rivers.

People are ignorant of the fact that late king Birendra cancelled Karnali Chisapani storage multipurpose project (10,800 MW) after he was informed of Indian intention of deploying Indian security force in the project. Jagat Mehta, former Indian external affairs secretary has written that “Stray suggestions such that Karnali would be of such vital importance for India that it might have to be protected by Indian security forces only deepened the apprehensions that cooperation with India could jeopardize Nepal’s sovereignty” in his paper in his paper titled “India-Nepal relations: A victim of politics” included in the book titled “India-Nepal Relations – The Challenge Ahead”, published by Observer Research Foundation in 2004.

Security of hydropower project
In this backdrop, Nepal will not be in control of electricity supply to India. Rather, India will deploy her security force in projects that export electricity to her, thereby compromising Nepal’s sovereignty. Strangely, Nepal’s current federal MP Radheshyam Adhikari had opined in January 2010 that India can propose to deploy her own security force to protect her investment and he didn’t deem such proposal unnatural, in an article published in a vernacular weekly named “Yo Sata”. It is indeed strange and surprising that he sees no problem in compromising Nepal’s sovereignty, independence and nationality.
Let’s take a close look Arun 3, under development by Sutlej Jal Vidyut Nigam (SJVN). Its foundation was recently laid jointly by two PMs of Nepal and India online. Using above logic, it is possible that Indian security force will be deployed to protect Indian investment in this project.

In any case, full authority to decide as to when to generate electricity, how much to generate, whether to export or not, etc. will be vested in the project owner. Even if India doesn’t deploy her security force in it, government of Nepal cannot interfere in these decisions. Even in the projects that produce power for Nepal’s own consumption like Khimti, Bhote Koshi, etc. the decision as to how much to produce and when to do so are made by the owner. Nepal government has no authority to interfere. Except during emergencies, government cannot interfere in private businesses.

Power Purchase Agreement
Those with infantile dream forcing India to kneel don’t comprehend the mechanism of project implementation. A project cannot be implemented without obtaining generation license, condition precedents of which are signing of power purchase agreement (PPA) with electricity evacuator and achievement of financial closure. Once PPA is signed, the project is bound to supply electricity to the buyer as specified by PPA and failure to do so amounts to serious breach of contract amounting to default that could lead to eventual auction of the project. If something as disastrous happens, it will destroy Nepal’s image internationally.

Bhutan’s prosperity
Those enamoured of Bhutan model are unaware of main features of so-called “Bhutan model”. They are belabouring under mistaken impression that Bhutan implements export-oriented projects. Articles 8 and 9 respectively of agreements signed between Bhutan and India for development of Chukha and Tala projects clearly state that these projects export only surplus electricity after meeting Bhutan’s own needs.

Whereas, power development agreements (PDAs) related to Arun 3 and Upper Karnali state that these are export-oriented projects and only 12% and 21.9% electricity respectively is given to Nepal free of cost. These projects are not for internal consumption of Nepal, not designed to export surplus electricity. What adds insult to injury is the provision that even free energy to Nepal is to be exported.

Bhutan treats electricity as input of production and of the electricity consumed in Bhutan 80% is consumed by industries. Whereas, in Nepal only 40% of electricity consumed is used by industries. One should not lose sight of the fact that consumption of one unit of electricity can result in value addition by 86 US cents (equivalent to Rs 90 at current exchange rate) by multiplier effect coming into force. Hence, Bhutan became prosperous by using electricity in industries rather than by exporting.

Another reason behind Bhutan’s prosperity is the fact that these projects, built with 60% Indian grant and 40% soft loan, are owned by Royal Government of Bhutan. Therefore, all profit earned by these projects go into Bhutanese government treasury. However, it is not true in case of, for example Arun 3. All profit will be monopolized by SJVN. Nepal government could have shared the profit by way of income tax. But this project is entitled to 100% income tax exemption in first 10 years and 50% in following 5 years. Nepal’s fate will be limited to salivating at the quanta of profit such projects earn and repatriate.

Nepal will receive neither electricity, nor profit.

Electricity for Nepal
Some suffer from illusion that construction of export-oriented project will make electricity available in Nepal. Consumption of electricity in Nepal and export are mutually exclusive. Electricity will be available where the electricity is exported by these projects.

Bhutan has already achieved 100 per cent electrification, while it is claimed that 60 per cent have access to electricity in Nepal now and it will increase to 100 per cent in 5 years. The tragedy is that electricity may be accessible to 60 per cent but being unable to afford the cost of connection and utility bill many are forced to live in darkness.
Such darkness can only be dispelled by setting up industries where the electricity is produced to generate employment. No employment, no source of income to enable to afford electricity.

Mitigate trade deficit
Specifically looking at salient features of Arun 3, people with pipedream of bringing India to her knees also say that if Arun 3 exports 3,139 GWh electricity (total generation 4,019 GWh minus 880 GWh free to Nepal) at Rs 5/kWh, Nepal will receive Rs 15.69 billion/year. This is incorrect. As electricity exporter is Indian company and importer too will be Indian/foreigner, such payments will not even pass through Nepal.

Recently, MP Binod Chaudhary (Nepal’s sole multibillionaire) commenting on budget for next fiscal year in parliament reiterated the need to export electricity to mitigate trade deficit. He is not alone in believing as such. As explained above, export of electricity by project developed with foreign investment will not mitigate trade deficit effectively It can only happen with projects that are fully financed from sources within Nepal (for both equity and debt).

It can also be understood by comparing with commodity export: exporter would receive payment in Nepal through banking system and gets incorporated in current account of Nepal’s treasury impacting both trade and payment statistics. In case of exporting electricity from project developed with foreign investment, Nepal’s banking system will not see a rupee of the payment for exported electricity.

Risk of Nepal having to kneel
NEA has announced that there is no load shedding throughout Nepal, sometime back. That was deemed to be some sort of achievement. But almost 50 per cent electricity is being imported from India. The scenario will continue even when Arun 3 is commissioned which is export-oriented and Nepal will have to continue importing till projects are implemented exclusively for consumption in Nepal.

Nepal’s need for electricity, including latent demand, is huge. Former energy minister Top Bahadur Rayamajhi said that Nepal needs 5,000 MW. The requirement will be more if transportation is electrified. In 10 years Nepal can easily consume 10,000 MW. If double-digit economic growth is the ambition, even 20,000 MW will be like a drop in the ocean.

If Nepal continues on this trajectory (allowing to implement export-oriented projects and importing to meet Nepal’s need), Nepal will be in a tragicomic situation to have to import electricity of, for example Arun 3 via India. Insult will be added to the injury when Nepal is forced to import same electricity at higher price than it was exported at.

Another facet of this equation is that India would be in a position to turn off electricity supply anytime it is unhappy, thereby being able to force Nepal to kneel. Like the plan to export electricity in early 90s transforming into Nepal importing from India, plan to force India to bring to her knees could boomerang into Nepal having to kneel. Policy makers need to make course correction to avoid falling into such a trap, which will not only be ridiculous, but ludicrous too.

Therefore, allowing to develop projects as export-oriented amounts to shooting at one’s foot. Prudent course is to develop them for Nepal’s consumption and export any surplus.

Ratna Sansar Shrestha

Published in People's Review of June 14, 2018