Thursday, November 20, 2008

West Seti project and “One Sided” Perspective

A reader, who claims to have read my paper titled “West Seti Project – a Nepali Perspective” has sent me an email saying that (1) the “paper is one sided (completely ignored positive side of the project) and (2) is preventing the country's hydro power development (3) which will ultimately hamper economic development and (4) social upliftment of the country.” His taking the initiative to comment is appreciable and affords us an opportunity to continue with the dialogue and also continue the engagement process. This process will help Nepali people get to the heart of the matter. Because, the subject matter isn’t too easy to understand (even a highly educated person like him didn’t understand it – or rather I failed to make it clear to him in my first attempt) and it will not be surprising if some other people too take a little longer to understand (there already is a critical mass of intelligentsia who have understood the “perspective” and have expressed their solidarity with me.

1) One Sided Paper
1.1) First of all, without feeling even a bit of embarrassment, I will confess that I am indeed a one sided person in this respect and the objective is to secure the interest of my motherland (hope this does not come as a surprise to people like him!). I am rather proud to be one sided as such. I know of many people in Nepal who will not tire of proclaiming their patriotism and say that they are working for the best interest of Nepal and people in Nepal but use every opportunity to betray the nation and the people no end. Just looking at the water resource sector – from Koshi through Mahakali treaties and the barrages/embankments that India has built near the border against the international law – one can easily draw this conclusion. These people misinterpreted and took out of context various national and international laws, treaties, conventions, precedents and practices to give away what is rightfully due to Nepal – all in the name of “best interest of Nepal and people in Nepal.”

However, I am not misinterpreting and taking out of context any national and international law, treaty, convention, precedent or practice as they are doing. I am merely doing my best to use/interpret national and international laws, treaties, conventions, precedents and practices in a manner such that Nepal will benefit; she will get what is due to her. I know (I am sure everyone knows) that that is what a person will do in order to secure his/her own property (actually in the matter of personal property some even go overboard in interpreting laws to ensure that they get more or get to keep more). However, I am not going about misinterpreting and taking out of context various national and international laws, treaties, conventions, precedents and practices, for that purpose. I am merely endeavoring to secure what rightfully belongs to Nepal. I don’t see anything wrong in this. To me going the other way – surrendering Nepal’s interest to serve the interest of the neighbor – is the betrayal of this nation (irrespective of whether done as such for personal gain or no such gain). I am unable to stand idly by while people are doing this.

I also think it is better to be one sided like me (to me, absolutely normal behavior) than the other extreme of one sidedness – there is no dearth of such people in Nepal – who announce their love for Nepal, euphemistically from the rooftop, while working to harm her interest.

Someone even called me a biased person. In my considered opinion it is no crime to be biased in favor of one’s motherland. I would like to compliment Indian people who don’t, generally, betray their motherland as such. I have found them working really hard to ensure the interest of their motherland in every possible way. I will give one example. In a map portraying Koshi flood, India Today, a popular and established magazine, published in the week of September 8, 2008, included Nepal’s Terai in Indian Territory. I don’t believe in doing as such, and my endeavor is not to “cheat” India of what rightfully belongs to her. I am merely striving to make sure that Nepal gets what she deserves.

1.2) This person seem to have jumped to such a conclusion about me because, in his words, I have “completely ignored positive side of the project.” However he didn’t cite any example to substantiate the allegation. Looks like he had to make this comment for some – explicable or inexplicable – reason but was unable to find any basis to justify his own allegation.

Having studied the presentation made by Mr. Bill Bultitude, Managing Director of West Seti Hydro Ltd., it is clear to me, that I have not ignored any positive side of the project in my assessment. He talks about “BOOT structure – asset transferred free of charge to GoN at the end of the license period.” In my paper I haven’t ignored this “benefit”. My only disagreement is with the unnecessary hype (which could mislead uninformed people) created about it in terms of “assets worth $ 1.2 billion.” I have merely proved that when this asset will be transferred to Nepal, it won’t be worth this much – neither in terms of present value, nor depreciated value or even practical value. On the contrary there is the issue of decommissioning which the project people, and both hydrocracy and donorcracy (bureaucrats of donors) have not only ignored but have failed to be transparent in this respect. I am glad this issue is now out in the open.

In listing “benefits to Nepal – the people” Mr. Bultitude talks of “creation of up to 3,000 jobs during 5.5-year construction period. However, in assessing the backward linkage I have used 5,000 jobs – a clear case of over estimation on my part. I am sure that this definitely doesn’t amount to my ignoring “positive side of the project.”

In the list of benefits Mr. Bultitude also includes “direct injection of funds by GoN into the Project Area Districts.” But this definitely is not a benefit that the people of Nepal derive from the project. Then he talks of training and skills development program, Nepali contractors getting work, development of infrastructure in the area, 8 MW power station for sale of energy for local consumption, 4% equity to be reserved for the local residences, direct employment opportunities, spin-off benefits, technology transfer, training, etc. It should not be too difficult to understand that the thrust of my paper is that there are better alternative approaches for the implementation of this project which will serve Nepal’s interest better (you will recall that, in my recommendation, I have suggested two models). As all the benefits Mr. Bultitude refers to will also accrue to Nepal even if one of my models is adopted, these “positive sides” are not special to the way this project is being envisaged to be implemented and neither have I ignored these benefits.

Mr Bultitude also goes on to list benefits from royalties. I definitely haven’t ignored this benefit. Under the heading of “fiscal linkage” I have taken this into account which, in my reckoning, is worth $ 4.4 million (about Rs 330 million) per year. It is clear that that this benefit will too be reaped by Nepal irrespective of whether the project is implemented as I have recommended or people succeed to implement it under which Nepal, in my opinion, gets short changed of revenue streams that she is rightfully entitled to, like recompenses for flood control in wet season, augmented flow in dry season, and carbon offset.

Moreover, in order to build a reservoir project, Nepal is required to sacrifice its land – 3,004 ha under the reservoir in this case. But projects without a reservoir are paying 7.5% energy royalty and Rs 400 per kW as capacity royalty (on top of 27% free equity in the case of upper Karnali project). In view of this the positive benefit from the West Seti project is definitely on the lower side substantially. Similarly in the case of free energy these projects are providing 12% and 21.9% (by Upper Karnali and Arun III respectively) compared to 10% from this project. In this backdrop the project’s positive side is severely on the lower side because, for this project Nepal, it seems, is getting her land submerged (hence sacrificing) for nothing. As the magnitude of positive benefit is much lower, it is incumbent on a person like me to question it. In this respect too, it is clear that I didn’t ignore the positive side, but merely pointed out that with better structuring Nepal could have received royalties and free energy at a higher level.

I am sure that people know about the tariff at which NEA imports energy and purchases from domestic Run of River projects and the tariff at which electricity from this project is planned to be exported. A project generating peak-in energy (which is not possible without submerging Nepali land) is planned to be sold at dirt cheap tariff. It is also clear that the quantum of benefit from royalties to Nepal would have been much higher if the tariff was fixed at a reasonable level. Looks like the project people would have preferred that I didn’t raise these questions, notwithstanding all these. Since I have already raised it, I am one sided in their eyes. Too bad!

2) “Preventing the Country's Hydro Power Development.”
2.1) I wonder how my raising a few questions as such could prevent country’s hydropower development. These people are making me feel really important. I doubt if my raising a few questions like these will stop the work as I am not an important person that people need to pay heed to. For me it’s just like “emperor’s new clothes” – when I see that the emperor (hydropower development) is actually not wearing any clothes – forget the fabled new clothes.

2.2) I wonder what kind of hydropower development people like him are referring to. In the way the project is structured, people will be soon become disenchanted/disheartened – once they start to understand – and begin saying that it’s better to not have hydropower development than have Nepal short changed on every pretext, at every opportunity. I have proved that even neglecting the downstream benefits, by better packaging of royalty and free energy Nepal could have benefited at a higher level than what SMEC is promising.

Since he wanted to talk about hydropower development, I wish that people like him were able to analyze the benefit of forward linkage due to use of electricity in Nepal to the macro economy, rather than exporting it. At the moment Nepal is suffering from energy famine and by the time the project will be commissioned Nepal will be in a position to use much of the electricity produced by it. But it will be going to India at dirt cheap tariff and Nepal will be forced to continue to import from India at double the tariff or resort to load shedding. This isn’t a prudent model of development of hydropower. The positives of using electricity in the industrialization of the country which will generate employment at higher level and its consequential positive impact on the economy are higher by a magnitude than by exporting it at dirt cheap tariff.

2.3 The model of hydropower development these people are partisan to also will develop Nepal’s hydropower but imagine at what cost. Nepal is required to relinquish its rights over augmented flow worth Rs 5.8 billion per annum and carbon offset benefit worth Rs 1.5 billion per annum, in total Rs 7 billion per year even without reckoning for flood control benefit. Properly/correctly structured the project can generate the amount the project people are saying – the correct amount, though – and additionally Rs 7 billion annually. I hope this isn’t too difficult for people to understand.

3) “Ultimately Hamper Economic Development”
People like him seem to believe that raising questions as such will hamper economic development. On the contrary the wrong model of what is called hydropower development will hamper the economic development of Nepal – export peak-in energy at dirt cheap tariff, receive royalties at very low rates and the lowest possible free energy, and, most importantly, sacrifice downstream benefits (worth Rs 5.8 billion per annum) and carbon offset benefit (worth Rs 1.5 billion). I doubt that for such a small economy like ours sacrificing over Rs 7 billion (at current price) each year will lead to economic development. All the developed and prosperous countries are where they are today because its people ensured that their country got almost all of what they deserved, not because they gave up what they were rightfully entitled to, in the name of ensuring best interest of their motherland.

Economic development of Nepal requires mobilization of huge amount of fund and giving up Rs 7 billion annually – which is not petty cash, even for rich countries – deprives Nepal of the much needed cash. Therefore, nobody has right to give up such an amount in the name of “economic development.” Well, some people – much pampered by the state that they are – may think that such amount could be given up. But most of the people, who have yet to see any semblance of economic development, need that kind of fund to undertake development work and Nepali people need to work hard to ensure that Nepal is not deprived of such amounts.

4) Hamper Social Upliftment of the Country.
It was also alleged that my approach will hamper social upliftment of the country. But I fail to see what kind of social upliftment the likes of him talking of when Nepal is getting short changed at every opportunity, on various pretexts.

Hence, one sided people, without being able to substantiate it, who call me one sided are just venting their frustration. Such frustration may have emanated from the fact that although they, proclaiming to be patriots, say that they are working in the interest of Nepal and people in Nepal, also know at their heart that their actions might have short changed Nepal of what rightfully belongs to her (probably a case of guilty conscience). It probably does not sit too easily on their conscience for having been involved in interpreting national and international law, treaties, conventions, practices such that it ends up benefiting a foreign country rather than Nepal.

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