Sunday, January 11, 2009

Very Instructive Exchange on Hydropower

December 28, 2008

Mr Ambika P. Adhikari
Phoenix, AZ, USA

Dear Ambikajee

Thanks for joining in. We had a very lively debate.

You have hit the nail at the right place by articulating that exporting electricity is "like the high tension lines that pass through barren lands or impoverished villages where poor villagers just watch the transmission lines." While Nepal is facing electricity crisis, which will last even after commissioning of 10,000 MW in 10 years, under current policy (please refer to my article on the subject @, it will not only be the improvised villagers who could ill-afford electricity (unless their purchasing power is increased by generating employment or by increasing their income from agro activities) that will be watching the high tension lines but even industrialists as well as city people who are able to afford will be doing the same. All of this is going to happen in the name of Nepal earning Rs 250 billion as royalty from 10,000 MW which sounds "thrilling" but is actually merely a mirage we in Nepal are being seduced to chase. Those dishing out this number has done some sexing up as is obvious.

Another important point in your email that could not be overemphasized is "Export of power is only beneficial if the money earned can be channeled into productive domestic ventures." This is also subject to the condition that Nepali economy will have to be able to retain the proceed of the export revenue in order to channel it into productive domestic ventures. The way the export oriented project like west seti is structured Nepal will be able to retain only around 3% of the export earning which is infinitesimal compared to the high sounding numbers that have been dished out by the likes of TN Thakur and powers to be in Nepal. Please refer to my write ups related to west seti and another one on the topic of "irrelevant debate of small vs. big" at my blog. Further, what I call backward linkage depends on what you have described as the absorption capacity in the country which is very limited currently due to which the investment made to implement a project like west seti also will not stay in Nepal's economy.

You have mentioned Bhutan and I have met many learned people clamoring for replication of Bhutan model in Nepal. Although I have not been to Bhutan, I have studied the so called model closely. I have written an analysis on this topic which has been published under the title "Nepal is not Bhutan" by Nepali Times sometime back. I have posted it also in my blog. This is not a path for us for various reasons most important one being the security aspect. Besides, to borrow from DipakG (Jai hos!) India will need to build more than 17,000 MW in Nepal under 60 (grant) 40 (loan) formula in Nepal for Nepal to be lifted to the same level as that of Bhutan if that "level" really exists. Notwithstanding the special relationship that is supposed to exist between the two countries, India has built less than 100 MW is so many years. I have also come across a news clipping which reported that Bhutan doesn't have necessary power for its industrialization - the result of exporting electricity in the manner of scorch earth policy. I am not familiar with "Laos model" but Jeewan Thanju has kindly made available an article on the subject and will peruse it to broaden my horizon.

There is one final point that I would like to bring to the attention of this august forum. In Nepal people equate water resource with hydropower and so forth. The water resources have many more beneficial uses for Nepal besides generating electricity. I have also written an article on the topic: for Civil Service Journal: Nepal's water resource and new "Nepal" which too have been posted at my blog.

With best regards,


Ratna Sansar Shrestha

From: NNSD@yahoogroups।com [mailto:NNSD@yahoogroups।com] On Behalf Of Ambika P। Adhikari

Sent: Saturday, December 27, 2008 21:19

Subject: Re: [NNSD] Re: Rs 250 billion as royalty from 10,000 MW

Dear Shankar jee, Ratna Sansar jee and friends

I agree with Bishwambher, that this exchange has beenvery instructive for many of us towards anunderstanding of the political-economy and financialimplications of hydro-power development in Nepal। Evenif the numbers need revision, the potential financialbenefits of a 10,000 MW hydro development in Nepalseem to be astounding।While hydro remains such a prime option with so manyshovel-ready projects and with relatively lesserenvironmental impacts, I was surprised to read about aproposal for a thermal power plant in Nepal। Cananyone shed light on this news?Also, I listened to PM Dahal's interest in thedevelopment of hydro-power in Nepal while he was inNew York in September this year। He seems to bealmost infatuated with the idea that hydro could be apanacea for Nepal's development problems। While, I amalso excited about the potential of hydro developmentin Nepal, eh PM's notions could be unrealistic andutopian। In my mind, lasting socio-economicdevelopment in a country is only possible through acomprehensive strategy of investment and developmentin many sectors - including in education, health,infrastructure, energy, environment, social protectionand governance. The benefits from hydro developmentcan only be fully utilized if there is enoughabsorption capacity in the country with commensuratedevelopment in other sectors and infrastructure, sothat people can utilize power to enhance theirinvestment in business, industry, manufacturing andother areas and thus raise income.Export of power is only beneficial if the money earnedcan be channeled into productive domestic ventures. Hence, there is no alternative to investing in andincreasing the domestic capacity for development. Else, it will be like the high tension lines that passthrough barren lands or impoverished villages wherepoor villagers just watch the transmission lines। Shankar jee, it would be valuable of you could sharethe experiences of Laos, Bhutan and other hydro-powerexporting countries in national development।Thank you.Ambika P. AdhikariPhoenix, AZ, USA

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