Re: My article in Spotlight on Upper karnali

March 24, 2010

Mr Ajit Narayan S Thapa
Former Managing Director
Nepal Electricity Authority

Dear Ajit Narayanjee

I am highly enthused by your joining this discourse. Thanks a lot. By sending following email you have afforded me an opportunity to clarify a number of issues that are at the top of people’s mind. This will help crystallize not only this issue but it will also help with the thought process of the people.

I generally welcome such questions but I welcome these from you more so for reasons that will become obvious to you as you read on. I will answer each of your questions below:

Q1. Why did not the maoist led Gov' obstruct the construction of the project and or its cancellation (if this was so detrimental to our national interest) when it was in power?

A1. The answer to this particular question of yours will have to come from UCPNM. I hope you will direct this question to the concerned.

The reason you have asked this question of me is due to the fact that, I suspect, people are mistakenly associating me with that particular party as my opinion and the opinion of that party converges on this particular issue. I am not associated with that party in any manner whatsoever; for that matter neither am I involved with any other political party. I am not only an apolitical person but I, moreover, don’t believe in any form of communism; least of all Maoism which is considered to be at the extreme fringes of the left. I believe in rule of law, democracy, et al and I am against any form of dictatorship or absolute rule (I have even written/published against absolute monarchy about 26 years ago, in the heydays of absolute monarchy, and was saved from getting incarcerated by the proverbial skin of the teeth).

Contrasted with the fact that there is similarity of opinion between myself and UCPNM on the matter of Upper Karnali specifically, I happen to disagree with them on a gamut of issues related to water resources, like Naumule storage project, Pancheshwar project, etc.; all of which is on public record. Besides questioning Prachanda’s reported proclamation in India, during his visit to Tehri project, that he will take initiative to implement Pancheshwar Project in my articles, I have categorically criticized him for his reported stance, in programs, inter alia organized by YCL on 5th December last year and by UCPNM on 9th January. Mohan Vaidya Kiran came to Prachanda’s defense in the first program and Prachanda was personally present in the second program where he denied having made any such commitment.

I also disagree with UCPNM on the matter of restructuring Nepal on ethnic lines. Although, I am not against federalism per se, but I fail to see justification for parceling out this tiny country into 14 provinces, that too, mostly, on ethnic lines. I have written a number of articles on this subject such that I even got inducted into a panel against federalism in Nepal last Wednesday. UCPNM has already publicly declared that that panel is its foe.

UCPNM has supported the idea of building fast track access to Tarai from Kathmandu. I not only am opposed to this but have published number of articles criticizing the idea, including in “Greatway Magazine” published by Om Sharma who was Press Secretary to Prachanda when he was PM. In my considered opinion Nepal should go for electrification of transportation in all viable routes (this particular segment is most viable due to the heavy traffic) instead of perpetuating dependency on fossil fuel further, with appurtenant problems of balance of trade and balance of payment (including hemorrhaging NOC) as well as local pollution and global warming impact.

I trust you will now understand that, unfortunately, there are more issues that I disagree with them than agree.

PS: BTW, although you are talking of obstruction of construction of this project by UCPNM, you should note that, as the construction of the project is yet to begin, UCPNM isn’t in a position to obstruct its construction. Some impediment did get placed on the completion of detailed studies that GMR is conducting. From my perspective it is right time to draw people’s attention to the failure to properly optimize the project. After the commencement of real construction work, it will be too late to even wonder about the real potential of the project. From this view point, UCPNM’s work is timely.

Q2. If it were a 4000MW storage project, why has it been pedalled around as a 300 MW for so many years?

A2. This is another question that should better be addressed to the powers-to-be, present and past. This scribe, who has never been in power, nor intends to be, isn’t in a position to supply an answer to this question of yours. A study commissioned by NEA, financed by the World Bank, conducted by Himalayan Power Corporation (HPC), has categorically concluded that the specific site’s full potential is 4,180 MW storage; report published in 1989. The report also categorically states that 4,180 MW storage project is mutually exclusive of 300 MW RoR project. Now the energy minister is going about telling that the site has been optimized at 900 MW, but that, if true, is still detrimental to Nepal as she will be deprived of building it at its optimum capacity. I am sure that you are aware that built as a storage project, it will generate peak power (which will be of higher quality, fetching higher tariff, compared to RoR power that generates spill energy in wet season and not much energy when we need in dry season) and also generate augmented/regulated flow of water in the dry season which has a significant value on its own (Lesotho supplies 18 m3/s water to South Africa for US $ 25 million per annum).

The powers-to-be pedaling it at around 300 MW, as you have put it, must have done so either due to their ignorance (criminal or negligent) of the existence of this study report, which amounts to sheer incompetence on their part or for benefits pecuniary or otherwise – some form of corruption. It could be a case of “both of them.” Your guess is as good as mine.

Q3. If you were so confident about its true potential, why did U not speak up for so many years when repeatedly,it was being touted around fo as a 300 MW project?

A3. I like the tone and tenor of this question of yours. Because, you have effectively placed me on a pedestal by charging me with the responsibility to “speak up for so many years.” Further, you have gone on to challenge my “confidence about its true potential”, too

The task to ensure optimum exploitation of this particular site (for that matter any other site) has never fallen on my shoulder. If I were ever reposed with that sort of responsibility, only then I could be charged with dereliction of duty and your question would have been relevant. Unfortunately, the situation warranted for me to speak up just recently and even now people are trying to silence me. If I had spoken up before it became relevant like now, then nobody would have listened to me. Besides, as an outsider (never in power), I only learn about the mistakes powers-to-be make after the mistakes are made. If the situation/process had been such that powers-to-be would have been required to seek the opinion of the likes of me prior to arriving at a decision then there would have been fewer mistakes that the powers-to-be could/would have committed.

Further, it’s not my confidence about its true potential that is important and relevant here. Simply because, it wasn’t I who was involved in the assessment of its true potential and, besides, like yourself, I am not a technical person that would and could have been charged with that particular responsibility, nevertheless. As mentioned above, the true potential was assessed by HPC, who, I believe, were qualified and competent for the purpose. If the people assessing the full potential are unqualified and incompetent then too I am not accountable simply because I didn’t “hire” them in the first place.

In effect you, without saying so, you are also asking me “why now.” You will have to grant me that it will not be possible for me to have read the reports of all studies ever commissioned by NEA. One would refer to such reports only when impelled to by the situation/circumstance. You could still ask me, like the tiger, drinking water upstream, of a lamb, drinking water downstream, why didn’t I study the report sooner. Then I will have to ask you why you, in particular, are asking me this question. Because, you should have been informed of the true potential of this project sooner than me as you were MD of NEA in early 90s. From your line of questioning it looks like you too came to know about it only recently. It was NEA which commissioned the study and you must have had access to this report while you were its chief executive. I have to admit that I too got associated with NEA in the capacity of a member of its board of directors in 2002. But unlike an MD, I get involved only with the issues that are tabled in the board meetings and board members aren’t expected to go about poking their noses in matters not included in the agenda of board meetings (having been CEO of many an institutions, you must be aware of this). Besides, unlike an MD, a director isn’t associated full time with NEA and there is no potential for the likes of me to go about accessing all study reports; nor could I afford time for the purpose. Moreover, from August 2003 to August 2004, I was forced by the situation to behave like a member of opposition bench within the board with the change in chair of the board.

At another level it’s also true that all those working in/associated with water resource sector (or for that matter hydropower sub sector) should have been aware of this, including this scribe. However, by that very token you too would be expected to be aware of this, and sooner too, than me as you were chief executive of NEA in, I think, 1994 (I am not aware when did you join NEA) while I became a mere member of its board only in December 2002.

I realize that I still haven’t answered your question as to “why now”. The question is important in the backdrop of requests of the Parliamentary Committee on Natural Resources and Means for my appearances from time to time for hearings on different issues and I also need to respond to this question to record it for the sake of posterity.

Parliamentary Committee first sought my opinion with regard to whether competitive bidding process already underway for this project should be scrapped and Elysee NEA Upper Karnali Hydro Electric Power Ltd. be allowed to implement the project, in the summer of 2007. You will recall that in the name of “fast track” a Singapore based company named Elysee Frontier was “given” this project in July 2001, through the backdoor; long time after you demitted your office in NEA. As this developer was unable to do anything within the stipulated time limit, the MoU lapsed (died its natural death) and there was no reason for GoN to reinstate MoU with it (the MoU was not legally binding agreement as GoN had decided not to execute it as a legally binding one), thereby preempting the need for the GoN to scrap the competitive bidding process. I rendered this opinion to the committee and the committee reached a decision on these very lines.

Charged with a task to select a developer to implement this project under the process I have mentioned above, Bhanu Acharya committee submitted a report to GoN but the Parliamentary Committee was unsatisfied with the report and it intervened, again. Then too I was requested by the committee to render my opinion on the selection criteria and process in late 2007. Having studied the selection criteria thoroughly, I reached the conclusion that the selection criteria was faulty and based on which a fair selection couldn’t be made. In this instance, the committee didn’t accept my opinion and it authorized GoN to go ahead with the selection of GMR for this project.

In signing the agreement with GMR for this project GoN acted in contravention of article 156 of the Interim Constitution (under which parliamentary approval is mandatory for agreements for the sharing of utilization of water resources) and a few legal practitioners including yours truly got together to take GoN to task. Therefore, we filed a writ application in the Supreme Court against GoN in early 2008. In the wake of news reports published about this project, Dr Ananada B Thapa, on his own, published articles in various papers expressing outrage over GoN’s failure to ensure exploitation of full potential of this project; 4,180 MW storage. I became aware of the full potentiality only after reading his articles. There was no way for me to know about this before reading his articles. Although the writ application was silent with regard to the issue of its full potentiality, I, for the first time, raised this point during the hearing in the Supreme Court on 12th March 2008. Since then I too have been trying to draw people’s attention to this failure of GoN, besides Dr Thapa.

Q4. Does Nepal have the capcity to finance storage project on its own in view of the fact that it has taken over 3 years to do a financial closure of the 456 MW Upper tama -Kosi project( exhauting practically all the internal financial resources)

A4. If you were to go through the list of power project so far implemented in Nepal, it will be difficult for you to find very many projects that were “financed by Nepal”. Most of the projects so far implemented by NEA were financed with external funding and same is the case with IPP projects. Of around 700 MW installed capacity in the country less than 50 MW was implemented with Nepal’s internal financial resources. Therefore, where does the finance come from is not relevant. What is relevant and important is to ensure the optimum exploitation of the resource for the benefit of Nepal and her people.

The obverse side of this argument is that it shouldn’t be for the financier to decide on optimum use of our resources, no matter where the financing comes from. Nepal should decide about it and ask for financing accordingly. To use an analogy, a horse shouldn’t be allowed to decide as to where should it go. As a horse needs to be fed and taken care of, similarly, an investor’s interest should be taken care of by ensuring adequate return but decision regarding optimum potential of the project and where should the benefits flow should be decided by Nepal and Nepal only.

Q5.If we keep on protesting against decisions to suit our own needs, will we not be bogged down by the indecision syndrone- analysis to th point of paralysis
A5. I am taken aback by your question. If we aren’t to exploit our resource “to suit our own needs,” then what is the point of exploiting our natural resources at all? What will happen to future generations to come if we are to continue to exploit our resources “to suit others’ needs”? Because at this rate and in this manner we will soon exhaust our natural resources for others’ benefit and the future generations to come will be deprived from its benefit and the dependency syndrome will be perpetuated which will be of a lot higher magnitude than now. Dependency syndrome is much more dangerous and “indecision syndrome”. Because, once the powers-to-be see the light and learn what is good for Nepal and Nepali people, right decisions can be taken eventually. But after giving away projects in this manner, these will be irreversible; mainly in the case of water, as the “right to existing prior consumptive use” will get invoked. I am sure that you are aware of this issue.

Q6. Can we really contemplate a 4000 Mw when we can not even begin the 600 MW Budhi-Gandaki project?
A6. Frankly speaking “we” haven’t implemented even a 10-MW project fully on our own as I have already pointed out above. Only Puwa khola project, 6.2 MW in Ilam, was built with full funding from NEA. Similarly, Chilime was done by “us” from financial perspective. But Electro-mechanical equipment for this project was supplied from Europe and civil works was done by L & T from India (part of it was done by CGGC from China earlier). In this backdrop, the important issue isn’t who implements a particular project. Rather the issue is whether a particular project is implemented in the interest of Nepal and her people or not.

In this respect too I disagree with UCPNM who say that they are “against implementation of projects by foreigners.” It is true that in order to benefit from investment linkage at the optimum level, capital from Nepal must have be entitled to first opportunity to invest. But in cases where Nepal lacks adequate capital, foreign investors must be allowed to invest. Take the case of Khimti which got implemented because of the breakthrough achieved due to the PPA signed during your tenure in NEA. People now are criticizing NEA for signing that particular PPA, but if Khimti wasn’t implemented at that time, present crop of IPPs would not have come to existence (Khimti definitely did show the way to investors that hydropower too could be lucrative business); nor would have load shedding problem mitigated in 2000 (you must be aware that Nepal saw the last of load shedding problem in 2000 after commissioning of Khimti) which began in mid 90s.

Therefore, to recap, the issue isn’t who implements a particular project but how; from the perspective of forward linkage benefit accruing to Nepal. You must be also aware that due to lower level of industrialization of Nepal, she is not in position to benefit from backward linkage. Hence, implementing this project at its optimum level is most important; it should be implemented to use electricity not only to mitigate our load shedding problem but also to industrialize the country and electrify transportation and also to use electricity for agro-processing purposes, etc.

Moreover, once built as a storage project, Nepal should plan to use augmented/regulated flow from this project to intensify cropping intensity in the downstream districts and to take advantage from other multidimensional uses of this water.

Q7. In view of our severe lack of implementation capacity,should we still let the waters of the karnali flow ( without us using it meaningfully_) for another20 years or begin to usethe 900MW( a fourth of the optimum size) as a less optimal decision is better than no decision and thus no implementation at all?
A7. Having established that whether Nepal lacks implementation capacity or not is irrelevant in the implementation of any project, there is no question of going for less “optimal decision” at all merely on this ground. In asking this particular question you are coming from the wrong perspective of why “still let the water flow (without us using it meaningfully)” which presupposes that water flowing in the rivers is “wasted”. Water flowing in the rivers is a part of natural hydrological cycle and it has been happening since last 4.54 billion years; not just since your or my time. Water flowing in the river naturally has no value unless spatial or temporal value addition has been done after investing for the purpose. Moreover, the phrase you have written in the parenthesis is what is of utmost importance: “us using it meaningfully”. Exporting power to India while we are suffering from huge load shedding problem and is likely to suffer it for many years to come, is not “us using it meaningfully”. We will be using it meaningfully, if we were to use it for generation of electricity to not only mitigate our load shedding problem but also to industrialize Nepal, electrify our transportation, etc. (I have said this earlier too). Therefore, this is an instance where the project is neither implemented at its optimum capacity nor are we using the water meaningfully for our own purposes.

Once a wrong project is built on a specific site, Nepal loses the opportunity of taking advantage of the better option. In this instance, additionally, it will be criminal to deprive the mid and far western development region from using 500 m3/s water in the dry season that can potentially irrigate 1.5 million hectares. Importantly, this project has been dedicated as export oriented project wrongly while Nepal is languishing in energy crisis which is likely to last for next decade or so if the present policy based on wrong vision is to continue to prevail. Therefore, a less optimal decision is not a better decision than “no decision.” Simply because a less optimal decision, if implemented, will put Nepal in a straightjacket after reaching a point of no return in its implementation. But if “less optimal decision” is not made then Nepal will have necessary latitude to make full optimal decision soon.

What we need to be wary of in hurrying with wrong projects in a rush to use water that is “flowing” is the potentiality to have to repent at leisure. Wrong projects planned to be built (this is an example) or projects implemented wrongly (middle Marshyangdi is a good example) in the name of water flowing away will give us ample opportunity to repent for long time to come. Talking about middle Marshyangdi, costing Rs 51 billion, Nepal could have built about 500 MW for this kind of funding. Similarly, making haste in the name of water flowing away to build storage projects like West seti, Budhi Gandaki, will entail Nepal losing the potential to use water during the dry seasons. Projects like these and upper Karnali should be built as multipurpose project. There is no dearth of funding and implementation capability for the purpose in this world as long as Nepal puts in place correct vision, policy and strategy and ensure investment friendly environment. Please remember that Khimti did chart a way forward in this respect such that 9th five plan succeeded in achieving over 90% target. But 10th five year plan fell flat on its face!

With best regards,

Sincerely,

Ratna Sansar Shrestha

From: Ajit Thapa [mailto:thapa.ajit@gmail.com]
Sent: Thursday, March 18, 2010 19:46
To: Ratna Sansar Shrestha
Subject: Re: FW: My article in Spotlight on Upper karnali

Dear Ratna Sansarji,

I read your article with interest and fascination. I have a few querries:

1. Why did not the maoist led Gov' obstruct the construction of the project and or its cancellation (if this was so detrimental to our national interest) when it was in power?

2. If it were a 4000MW storage project, why has it been pedalled around as a 300 MW for so many years?

3. If you were so confident about its true potential, why did U not speak up for so many years when repeatedly,it was being touted around fo as a 300 MW project?

4. Does Nepal have the capcity to finance storage project on its own in view of the fact that it has taken over 3 years to do a financial closure of the 456 MW Upper tama -Kosi project( exhauting practically all the internal financial resources)

5.If we keep on protesting against decisions to suit our own needs, will we not be bogged down by the indecision syndrone- analysis to th point of paralysis

6. Can we really contemplate a 4000 Mw when we can not even begin the 600 MW Budhi-Gandaki project?

7. In view of our severe lack of implementation capacity,should we still let the waters of the karnali flow ( without us using it meaningfully_) for another20 years or begin to usethe 900MW( a fourth of the optimum size) as a less optimal decision is better than no decision and thus no implementation at all?

I woud be interested to hear your views

than u

with warm regards

Ajit Thapa
On Mon, Mar 8, 2010 at 6:56 AM, Ratna Sansar Shrestha wrote:

Upper Karnali Uproar!

Ratna Sansar Shrestha