Saturday, August 7, 2010

Federalism and Water Resources in Nepal

                                                                                   Ratna Sansar Shrestha
1.     Preliminary
Is federalism a reality? What would be Nepali federalism like? The federal structure of the country is yet to be decided politically.  Nepali people want to know about federalism and its positive and negative impacts. Will it be beneficial to divide a small country like Nepal into provinces with the right to self-determination? If yes, how many provinces should be there?  What will be the consequences after the delineation of provinces? The political leadership should think about it in time and seek the opinion, support and approval of the sovereign Nepali people.  We should learn from the disappearance of Yugoslavia from the world map as a result of adopting federalism without any preparation.
It will not be wrong to say that the decision to adopt federalism was not backed by people’s pre-informed consent or through a general consensus. Rather, it was a decision made by a limited leadership, without any homework and giving proper thoughts about it. It should be understood in the background that before the election of the Constituent Assembly (CA), the Interim Legislature-Parliament made the first amendment of the article 138 (1) of the Interim Constitution 2007, with the provision that the country would be restructured  with  a federal system of governance. Perhaps it would not be wrong to say that the ideas of a limited few were imposed on the people in the name of a progressive move forward without any consultation, or seeking prior consent or approval of the general public about state restructuring, and whether or not to adopt federalism or other system of governance. Experts allege that the act of deciding to adopt federalism by the members of the Interim Legislature-Parliament by using the powers similar to that of the elected Constituent Assembly is a violation of the right to self determination of the sovereign people. An issue like adopting federal system (of governance) should have been approved only after holding extensive brainstorming, discussions and debates with the people. Actually the Interim Legislature-Parliament has attempted to preempt Constituent Assembly in the matter of deciding whether Nepal should stay unitary or adopt federal structure. An unelected body as such doesn’t any such right. In a recent verdict Supreme Court too has decreed that federalism as fait accompli without being solicited by any litigant.
Federalism was not declared in Nepal on the basis of the research studies on its positive and negative impacts in the country. Nor was it declared by forming a State Restructuring Commission according to the provisions of the Interim Constitution. No deliberation was held to decide whether the adoption of federalism in a small country like Nepal will prove to be a progressive move or otherwise. This has created confusion whether Nepal should continue the unitary system or adopt a federal system. As discussed above, the provision of adopting federalism by amending the Interim Constitution has deprived sovereign Nepali citizens of exercising their right to full and meaningful participation in decision making in matters pertaining to water resources in the future progressive set up. This has also violated the important element and right to environmental justice.
It will not be wrong to say that the elected CA members and Nepali people have been deprived from the opportunity of providing their consent after holding extensive brainstorming and serious interactions and discussions as to how the available water resources could be used for the maximum benefit to the country and the people. What arrangements could be made for equitable access to and utilization of and sharing of benefits from it? It will be appropriate to hold serious discussion on the matters, rights, responsibilities and duties relating to the water resources, and incorporate them as basic elements in the constitution.
In Nepal’s context,  water resources is as important as other issues such as  nationality, economy, structural arrangements, administration, security perspective and national integrity. It will be better to be clear about the challenges of optimum exploitation of water resources, its management and usage of the benefit for the betterment of Nepal and Nepali people in the federal context. What will be the model of the constitution? What kinds of provisions relating to water resources should be included in it?  It would be better if the Constituent Assembly (CA) discusses on the utilization of water resources, and formulates necessary provisions by arriving at a proper decision while adopting federalism in the country.  Whether or not the country adopts federalism, the problems described in this concept paper are inherent challenges pertaining to the utilization of water resources.
2.     Water Resources in Federalism
While some people understand water resources only as hydropower, others have extensive understanding of this natural resources which is instrumental in meeting basic need for livelihood along with the need for adequate pure and healthy drinking water, as well as its use in sanitation, irrigation, fisheries, water transport, tourism based on water sports, and its wise use for industrial purposes; besides electricity generation. Will there be any obstacles in the optimum exploitation of water resources, its management and usage of the benefit for the betterment of Nepal and Nepali people under federal structure? In case of obstacles, how should they be resolved? How would it be addressed?   What issues should get special attention while adopting federalism? How could people’s participation be made more meaningful and inclusive for equitable access to and utilization of water resources while ensuring equitable sharing of benefits? What kinds of decisions on water resources will result in the maximum benefit of the country and the people? It is essential to have serious thoughts and extensive discussions on this matter. Thus, it would be appropriate to hold discussions on the following points with regard to the water resources in federalism:
2.1  Nepali people’s Right to Natural Resources
Under the universally accepted principle of right to natural resources each Nepali citizen bred and brought up in any part of the country is entitled to equal right to the available natural resources of the country in any part of the country. For example, the Nepali people living in the concrete jungle of Kathmandu valley are entitled to the same equitable right on the trees, plants, woods, wildlife, herbs, etc. of renowned Charkose jungle (Green wealth). However, after the country is divided into different provinces under the federal system, complexities over sharing of natural resources is certain to arise. However, people of Manang district have misinterpreted the right to harvest ‘Yarsagumba’ (a medicinal herb) as their exclusive right and this has resulted in a shocking incident in which seven unarmed, innocent  people from Gorkha district were killed by  local people. This incident has revealed that with the imminent implementation of federal structure people have started subscribing to the idea that people of one province will not get anything from the other province, even before the adoption of federalism in the country. Therefore, it is high time to analyze the negative impacts that may result while sharing water resources after the adoption of federalism and to assess whether or not the existing Nepali economy can bear the burden of the uncontrolled and unlimited expenditure in the name of federalism?
2.2  Water Resources
Despite being one of the natural resources, the nature and forms of utilization and benefiting therefrom in the case of water resources is entirely different from other natural resources. It is necessary to identify the existing differences between water resources and other natural resources in the context of the federalism. By involving themselves and working as entrepreneurs local people can benefit directly from natural resources like land, forests, herbs, wildlife, minerals, etc. through collection, utilization and other forms of use i.e., harvesting fruit from trees and by cultivating land, collecting herbs, etc. Water resources, however, cannot be utilized in this manner. At the micro level local people can benefit from micro irrigation schemes, micro hydropower, tourism based on water sports and other industries. But the benefit from water resources can only be maximized by ensuring its optimum exploitation which is likely to be hindered by fragmentation of the country in very small units in the name of federal structure. People are already discussing division of water resources under federalism which is premature without its optimum exploitation.
2.3  Drinking Water
There has been an age old practice of buying a source of water of one village by another village. After twenty years of conception of the idea of diverting water from Melamchi River of Sindhupalchowk district through underground tunnels into Kathmandu Valley to resolve the drinking water problem of the capital city, the contract for the execution of the project was concluded only recently.  Although, this will deprive the local people from using the water of this river, traditionally used by them, no arrangement has been made to recompense them for being deprived as such. In the meantime, local people have been putting forward various demands for compensation, including sustained source of income for them. However, arrangements for such sustained source of income cannot be made by hiking the cost of drinking water for consumers. If source of this project is to fall in one state with right to self determination while Kathmandu valley in another state, the complexity of this project will get compounded.
Water is an essential “commodity” for human beings; also for plants and other land and aquatic/marine wildlife.  Water has also become a product for sale like other commodities. The tap water also bears a ‘price’ because of the stance taken by multilateral financial institution with respect to water supply utilities. The water sold in plastic bottles, jar or similar vessels and tankers has become a profit making business rather than a service oriented activity.
It was heartrending that about 500 Nepali citizens had to lose their lives untimely last year due to the outbreak of diarrhea, mainly in Rukum and Jajarkot districts of Mid-west region (and several districts of Far-west region), which was caused by lack of potable drinking water and sanitation facilities.  In this backdrop, it has become imperative, to incorporate a clause in the constitution declaring access to potable water supply in adequate quantum and also for sanitation facilities as one of the fundamental rights. Only such a provision will be able to respect the human rights.
2.4  Hydropower
Implementation of a large hydropower project may mean economic prosperity for some, but it also entails several negative impacts on the local people. For example we have numerous examples where local people living in the vicinity of the large hydropower project sites do not have access to electricity even for lighting their homes.
From the perspective of production and use, even though the Western development region produces the highest quantum of electricity (about 330 MW) in the country, it consumes only half of what it produces.  However, the Eastern development region consumes 20 times more electricity than what it produces (14 MW). The Central development region consumes a little more than its production (275 MW). Even if the existing five development regions are to be declared as the five provinces, this type of happy sharing will not be possible. Simple issue like pricing can spin out of control and provinces with more generation capacity can shut off power if the price is not right. There is even a possibility that if India is to buy at a higher rate, then a province could choose to export it rather than supply to other provinces. Thus, provisions should be made in the new constitution to vest the power in the Centre regarding the formulation of policies and laws for large hydroelectricity projects and the production, sale and distribution of the electricity and give power to local governments for small scale hydroelectricity projects;, should also incorporate local people’s rights and responsibilities in this regard. 
2.5  Priority ranking of uses of water resources 
Regarding the utilization of water resources, the Section 7 (1) of Water Resource Act, 1992, categorizes drinking water including for water for domestic use, irrigation, and agriculture based utilization like animal husbandry and fishery with  first, second and third priority, respectively, whereas electricity generation rates fourth priority.     However, after the implementation of hydropower project, the priority of the Water Resources Act will be superseded by the license granted which will entitle the hydropower project water in a specific quantum thereby rendering the priority ranking of the law irrelevant.  
Following the implementation of a hydropower project, the local people living in the upstream reaches of the river will not be able to undertake projects to irrigate new land because of the project’s water rights. The project’s electricity production will decrease if the quantum of water available to the project is reduced, and consequently, project’s revenue too will decrease; thereby rendering the project unfeasible. . In order to avoid this, the Rule 10 of the Electricity Regulation guarantees specific quantum of the water to the licensee in accordance with the license. If the Upper Karnali Project, for example, is implemented, the people in Jumla will be denied the opportunity of further consumptive uses of water from the Tila River. Thus, under the existing laws although irrigation rates the second priority, the implementation of a hydropower project in downstream area will change the firm priority in the upstream area in order to guarantee specific quantum of water under the license for the hydropower project. 
Priority accorded to drinking water by the law have been negated by the farmers time and again when the farmers break water supply pipelines, whenever monsoon rains fail, to irrigate their field during the plantation season thereby triggering extreme scarcity of drinking water to the consumers. This may have been taken as a simple incident in the unitary system but it could lead to serious incident in the federal system.
It has been said that the water of Yangri and Larke Rivers of Sindhupalchowk district will be diverted into Kathmandu valley to supply drinking water to the denizens there in the second and third phase of Melamchi Project. It may create problems as one hydropower project has already been implemented and construction work of several other projects is underway. Thus, it creates potential for serious disputes if several smaller provinces are to be created in the name of federal structure.
2.6  Shortage of Water in the River
Diverting water through canal/tunnel for a hydropower project creates dewatered area in a stretch of the river similar to the impact of Marshyangdi project on Marshyangdi river on the highway to Pokhara. If the electricity produced in one province is to be utilized in another then it will be difficult for the local people to agree to allow the construction of the hydropower plant due to this problem.  Thus,  the new constitution should ensure equitable access to and use of water resources, equitable sharing of the benefits, participation of local people in policy and decision making, monitoring and evaluation process, meaningful inclusive participation of nomadic Rautes (on the verge of disappearing), poor indigenous/janajati/women/dalit, excluded community without any discrimination on political economic, social, cultural, religious grounds. 
2.7  Multipurpose Project with Reservoir
A hydropower project with reservoir results in negative externalities by a magnitude than a run of the river project. The Kali-Gandaki A hydropower project, which stores water on a daily basis impacts less adversely than Kulekhani hydropower project, which stores water around the year. Apart from submerging land, forests (and wildlife), tourist site, temple, and local infrastructure, the construction of a reservoir project displaces local people.  
2.8  Downstream benefit  
With the implementation of a reservoir project, downstream areas stand to benefit due to availability of water even during the dry seasons due to augmented/regulated flow from the project. Such water can be used for industries, drinking and sanitation purposes, and for irrigation. The downstream areas will also benefit from water sport based tourism as well due to watershed improvement. If a project on water bodies involves two or more provinces, the water resources regulations will prohibit the  people living in the upstream will be deprived from the consumptive uses water as explained above while people living in the downstream areas will benefit as water will become available even during dry season for the purposes of irrigation. Similarly the province where the project is located will suffer due to submergence/inundation of land and displacement of the populace. In such a circumstance, the province where the project is to be located and the people in the upstream area will hardly be willing to have the project implemented.
 2.9 Irrigation
According to the official record, there are nearly 4 million hectares of arable land (of which the major portion in the lowlands) in Nepal. Of which only 500,000 hectares (less than 13 percent) has irrigation facility, mostly during the rainy season. Thus most land produce only one crop in a year; only if the rainfall is good. Crop yeld is bad if the monsoon is late, which results in food scarcity. In order to make constitutional provision of food security, it would be better for the political leadership to prepare a strategy and implement an effective plan of action to promote cash crop and ensure crop yield at least three times in a year, and prevent youths from going abroad and working as cheap laborers in the name of weak remittance. For this, reservoirs can be built in the mid-hills to collect rain water (during the raining season) and use it for the remaining eight months. If Nepal’s Terai is to become a separate province, the possibility of such a project will be reduced because a reservoir project will inundate land in the upstream areas resulting in displacement of local people while the people in the lower basin areas will stand to benefit through irrigation and other use of perennial source of water.
2.10 Flood control   
The construction of a reservoir will also control flood and landslides in downstream areas during the rainy season. However, disputes could arise between the provinces in upstream and downstream areas as the province in the upstream area will have to pay a high price to control floods in the province in downstream areas.
2.11 Resettlement 
Construction of a hydropower project with reservoir is not possible in the plains. It is possible only in the hilly area. Conversely there is not enough land in the hilly area to resettle people displaced by such a project due to lack of habitable lands. While there is enough land for resettlement in Terai but after declaration of Terai as a separate province, resettlement of people from hills in Terai will not be acceptable as it may disturb ethno-socio-cultural pattern of the area. The Tharus of the Western Terai have already refused to let the people displaced by the West Seti Project to be resettled in their area. After the delineation of separate provinces, the people of the upstream areas who stand to lose their land and be displaced by the construction of dams for hydro projects to provide electricity in other cities and irrigate downstream areas may not easily give consent to such projects.
2.12 Delineation of boundaries
Rivers have been used to delineate most of the districts, administrative zones and development regions of Nepal since long time. If two provinces are delineated on the basis of a river, there is a possibility for the two provinces to have different aspirations, needs and priorities, which will result in disputes forcing non-implementation of projects based on water resrouces.
2.13 Provincial conflict 
Since that Nepal is all set to adopt federalism in the country, the disputes over sharing river waters in the neighboring countries of India and Pakistan should serve as an eye opener to the problem.  There exists a dispute between Panjab and Haryana over sharing river water. Likewise, Madhya Pradesh, Maharastra, Gujarat and Rajastan are involved in a dispute over sharing the waters of Narvada River. There has not been much headway following the serious dispute between Tamilnadu and Karnatak over River Kaveri. Due to  disagreement of Bihar Uttar Pradesh was unable to build a hydropower project in Kanpur.
According to the Indian constitution, water resources is considered a provincial issue. Even though the constitution gives the Centre the power to deal with disputes regarding a river that flows through several provinces, dispute settlement has not been easy. Federalism appears reasonable for a large country like India, but a country like Nepal which is smaller than averate Indian provinces, the disputes that may arise between several smaller provinces regarding the appropriate use of water resources may pose serious challenge. The dispute between Pakistan’s Panjab and Sindh provinces regarding Kalabag project has impeded its implemtation. The local people who depend on water bodies for their livelihoods have been sidelined from participating in the formulation of policies and decision making, as well as in the evaluation and monitoring of appropriate uses of water. Thus, their right to inclusive participation on this matter should be ensured in the constitution without any discrimination on economic, political, social and cultural grounds.
Long before the discussion on federalism began Nepal has already signed Gandaki, Koshi, Mahakali and the Tanakpur treaty which are detrimental to Nepal. This happened while Nepal had unitary structure. With fragmentation on ethno-cultural-religious-linguistic lines in the name of federalism outsiders may pit Nepal’s one province against the other and take undue advantage. We can also learn from the challenges of federalism from other countries. If we make a hasty decision in adopting federalism and dividing the country, future generations would blame it on today’s intellectuals, writers of the constitution and all those who accepted it. 
3. Optimum Exploitation of Water Resrouce
Along with the concept of state restructuring on ethno--cultural-religious-linguistic lines people are also talking of division of the water resources. Without ensuring optimum exploitation of it, what could be divided in the situation obtaining at the moment is the division of flood during rainy season and drought during dry season. Nepal can benefit by ensuring optimum exploitation and distributing such benefit from multidimensional uses of the water resources.
It is obvious that indiscriminate fragmentation of this small country into more than 10 provinces on ethno-cultural-religious-linguistic lines will render Nepal unable to ensure optimum exploitation of water resources. Being different from other natural resources, there will not be much to distribute amongst various provinces if optimum exploitation couldn’t be achieved. In the case of water resources, Nepal and her people can benefit only by ensuring optimum exploitation, prudent management and benefit maximization through positive externalities.
Due to lack of river basin approach, sites that can result in multidimensional benefit have been “given” away as projects that will deprive Nepal from benefits of a magnitude. a prominent example is Upper Karnali project, which is an ideal site for 4,180 MW installed capacity with reservoir that has potential to irrigate up to 1.5 million hectares of land even in dry season and also flood control. However, GoN has already issued a license for this project as a run-of-the-river project of 300 MW.
Similarly, GoN has also failed to understand the potential benefit from electricity consumption in Nepal and have earmarked a number of good project sites that can generate quality power cost effectively while Nepal is suffering from the vagaries of load shedding.
4. Suggestions      
If necessary provisions are not made in the new constitution on the basis of above mentioned examples and suggestions to draw maximum benefits from water resources projects, the country is certain to face several obstacles. Nepal is geographically a small country and if it is divided into smaller provinces under federalism, the country is certain face problems in drawing benefits from water resources. Thus, it is crucial for the decision makers to give timely thoughts about restructuring the country into fewer provinces.
In view of the above, the best solution for Nepal is to declare provinces on the basis of river basins of large river systems. As Mechi River has a limited catchment area, we can have a Sapta Koshi-Mechi province in eastern Nepal. The river basin of Sapta Gandaki could be declared as the second province. Mahakali River too has a limited catchment area in Nepal, and therefore, we can have a Karnali-Mahakali province in west Nepal.
The right to decide the maximum use of a river that flows through a province should rest with the concerned province. Owing to the geographical realities of the country, the possibilities of disputes over water resources would be minimal if limited provinces are restructured on the basis of watershed areas of major river systems of the country.
In recent years, a trend has developed to obtain license by individuals or organizations from within the country and abroad to harness river water. This has denied local people to draw benefits from the river that flows from their area. This calls for reform in water policy in two ways. First, local people should have the preferential right to obtain certificate for the use of river water. Secondly, the local people who do not have the required capital to implement such water resources projects should be given the opportunity to have share in it through other means, and develop their ownership in the project. In this way local people will not be denied from the opportunity of investing in water resources projects and draw benefit from it. This will also prevent those who want to be rich by dealing with the certificates. Various demands (or protest activities) that may arise or may be raised in the name of local people could also resolve the problems associated with the successful implementation of such projects.
Since that most of the water resources projects could be basically capital oriented, there is not any possibility to charge high royalty from such projects. Thus, the right to get such royalty should rest with the concerned province, and it would be appropriate to make arrangements to spend the money only on rural electrification and for the construction of canal system for irrigation.
The question as to what kind of constitutional provision should be made in the federal set up regarding the preservation and use of water resources is very important. The suggestions have been made because it will be appropriate to make constitutional provisions for the maximum utilization of water resources through its conservation and wise use:
·        From the discussions held so far the new constitution envisions three levels of governance system – centre, province and local level government. Each level of the government will have the power to monitor the preservation and use of natural resources within its jurisdiction. Other powers will also be similarly divided between the three levels.
·        Water resources cannot be compared with other natural resources as it is not limited to one place, nor is it always limited to solid or liquid form, or remains underground, or above the ground, or in all the places or in all forms. However, it is essential for everybody. If it is not properly managed it can invite disasters. Thus, by considering its special characteristics and nature, it is necessary to specify it in the constitution as a fundamental duty of citizens to preserve it.
·        Since that water has its own distinct characteristics and inevitability, the ownership of which cannot be limited to one province, local government or community. Thus, the  power of control over it should rest with the Centre. The Central, provincial and local governments should have the power to mange and regulate it. 
·        Water resources form a part of the system of water cycle. Thus, water resources management should be done by understanding this water cycle. With the objective of drawing maximum benefits from the wise use of water resources it would be appropriate to collect available statistics on it, conduct feasibility studies of projects to be based on water resources, conduct research and analysis on it, formulate policies and strategies regarding it, set criteria and standards about it, outline priorities pertaining to project development, and include it within the rights and responsibilities of the Centre to give approval to technical aspects within the set criteria. 
·        It would be appropriate to include the management, monitoring and the running of projects within the jurisdiction of the Centre, or the irrigation projects that are to be built in two or more provinces, hydro-power projects, construction of reservoir and buildings to generate hydro-electricity, central electricity grid, drinking water projects etc. 
·        It would be appropriate to vest the power to the province to implement (by itself) mega and medium levels of hydro power, irrigation, drinking water and recreation based projects that will be limited within the province and are within its resource capacity, and needs to be implemented on the basis of the basic criteria and priority set by the sangh (organization). Moreover, it would be better to make a constitutional provision to rest the powers and duties to the provincial government regarding the supply of electricity by itself within its territory whether by linking or not linking it to the central grid.
·        It would be better to make a clear constitutional provision whether to allow local governments to initiate, implement and manage small scale projects, or to involve the private sector to do it.
·        It would be contextual to make necessary provisions for the Central, provincial and local governments to collect revenue from the projects implemented within their jurisdiction through an arrangement to make an equitable distribution of it by the Centre among the concerned provinces and the province to do the same among the local governments.
·        It would be better if set up Constitutional Commission on Environmental or Natural Resources at the Central level and Council on Environmental or Natural Resources, or Corporation  at each executive level to settle disputes that may arise among provinces or among local governments. Likewise, Committee on Environmental or Natural Resources should be formed at the Legislature level and,
Environmental Court
or Green Bench at the judiciary level.
·        Despite our long experience in social, cultural and religious diversity in the country, in view of the inevitability of our inter-dependence, lack of capacity, and inexperience of the federal system, maximum utilization of the country’s water resources would be possible only if the residual power for its management rests with the Centre.
·        There is a provision in Interim Constitution for the Legislature-Parliament to support, approve, or pass any general treaties or agreements on sharing water resources other than those that may not have extensive, serious or long-term impact on the nation, with the majority of the its members present. There is a need for clear interpretation about the extensive, serious and long-term impact of the activities pertaining to certificates issued for business investment, the distribution of the profits drawn from selling of electricity, and whether the distribution of profits made according to the treaty would be acceptable. If it is clearly stated in the constitution that it would be specified by a future act of the Government, it would help to remove suspicions about passing an act with the purpose of deviating from the intentions and provisions of the constitution. It would be better to give a thought about including a provision in the constitution as to the need for parliamentary approval to issue certificate for the initiation of projects with a certain specification, capacity, or size.  
·        There should not be any provision in the constitution to allow the export of electricity or other services relating to water resources in foreign countries though private entrepreneurs on the basis of letter of certificate, or through the provinces themselves. Since that the matters pertaining to the use of water resources is sensitive from physical, strategic and security reasons, it would be practical as well as contextual if the power relating to the use and sharing of water resources with foreign countries rests with the Centre.
These suggestions could form the basis for distribution of power and responsibilities among the Centre, provinces and local governments. The government’s decision about opening universities in the Mid-western and Far-western developmental regions resulted in heated debate, especially about the city where they were to be established. And, the debate still rages on. The decision about naming the capitals of the future provinces following the restructuring of the state cannot be free from such debates. Thus, it is necessary for the decision makers to do proper home work in this regard, otherwise the class that are happy to see such disputes without trying find any solutions would be quick to point out the anomalies of other people’s ideas. After the official declaration (on the model) of governance system, the importance of suggestions made in the concept paper on the equitable use and distribution of benefits of water resources would increase even more. It can be expected that there will be serious discussion over it after the model of federalism is determined.      
Published by UNDP in June 2010

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