Thursday, September 13, 2012



Nepal has already been declared a “federal” democratic republic; although, in the considered opinion of a section of the citizenry, it isn’t set in stone as sovereign people have not been “consulted” in this respect. Demand for provincialization on the basis of identities is seemingly gaining strength as political parties in the care taker government are pursuing it. However, impediments will be created in the optimum exploitation of water resources and sharing of benefits therefrom if upstream areas, downstream areas and project site lie in different provinces. This will not only deprive Nepal from the benefits of positive externalities from water resource projects, like flood control and augmented/regulated flow in dry season, but also downstream riparian countries like India and Bangladesh. Therefore, it is in the best interest of Nepal as well as other countries in Ganga River basin to create 3 provinces based on the watershed of 3 major river systems.

1. Nepal as a Federal State
A debate has been raging about federalism in Nepal, with the declaration of Nepal as a federal state by the Interim Legislature-Parliament in March 2007, by amending Article 138(1) of Interim Constitution of Nepal, 2007. Some oppose it dreading repetition of Yugoslavian history (which disappeared from the world map after the internecine ethnic conflict) and opine that Nepal should learn lessons from Rwanda, Ethiopia, Sudan, etc. Some advocate creating 10 provinces on the basis of single identities of about 10 ethnocentric (ethnic, cultural, religious and linguistic) groups – one province for each group, out of so far identified 118 groups; thereby depriving the remaining groups from the right to recognition of their identities. Strangely, the proponents of identity based federalism prefer one contiguous province for the whole southern plain known as Terai, depriving several prominent ethnocentric groups in the area from recognition of their identities. This indicates lack of consistency and rationale in the proposal to create provinces on the basis of identities.

Further, the federalists also demand right to “self determination” to the provinces. Nepal is smaller than an average province of India and use of right to self determination by the tiny provinces could entail spinning off of tiny “sovereign” states that could cause headache even for India and China. On the other hand this will also mean that the ethnocentric groups that aren’t fortunate enough to have separate provinces for their groups will be deprived of the right to self determination.

Moreover, the proponents of identity based “federalism” are seeking “preemptive rights” to the ethnocentric groups in the provinces named after them. For example Newars in Newa Rajya will be entitled to preemptive right in every walk in life as well as in governance. This will render other ethnocentric groups in each of such provinces second class citizenry. Similarly, it will also result in minority rule over majority as in all 10 proposed ethnocentric provinces the main group is in minority (to illustrate Newars are in minority in the proposed Newa Rajya).
All of these pose a serious peril of flare up of ethnocentric conflict, as about 10 ethnocentric groups will become privileged class (by having their identities recognized and being conferred with preemptive right) while disenfranchising the remaining.

Experts are of the opinion that the Interim Legislature-Parliament decided about it as if it enjoyed powers similar to that of an elected Constituent Assembly. This violates the right of the sovereign people to take decision in this respect after holding extensive brainstorming discussions and debates, subsequent to them being educated about manifestations and ramifications of federalism and also about the ramifications of the “preemptive” rights to be bestowed to about 10 ethnocentric groups. The decision process has deprived sovereign people from exercising their right to full and meaningful participation in decision through popularly elected body like Constituent Assembly (CA), which was effectively preempted by Interim Legislature-Parliament. An unelected body has no such right.

This has polarized politicos, intelligentsia and the general public and has potential to open floodgate of ethnocentric conflict as evidenced by the murder of 7 people from Gorkha by the people from Manag in Nar in 2009 over ownership of natural resources.

2. Perils from the perspective of water resources
In Nepal’s context, water resources, including other natural resources is as important as other issues like as nationality, national integrity, national security, ethnocentric identity, economy, etc. It will be better to be clear about the challenges of optimum exploitation of water resources, its management and usage of the benefit, including sharing thereof, for the betterment of Nepal and Nepali people in the federal context. It would have been better if the Constituent Assembly (CA) had discussed about optimum exploitation and the utilization of water resources in the interest of the country and formulated necessary provisions by arriving at a proper decision while adopting federalism in the country. If the country adopts federalism, the problems inherent in challenges pertaining to the utilization of water resources and sharing of benefit thereof needs to be addressed first. Water resource alone has potential to metamorphose Nepal from a backward, medieval economy to one comparable to India and China.

While some people and most political parties see only electricity in water resources. Others are able to see benefits that can be extracted from the multidimensional uses of water: adequate pure/clean water for consumption and sanitation (elimination of disease/death related to water and sanitation), multiple cropping through irrigation to achieve food security (abolition of famine) including from animal husbandries and fisheries (cost effective nutritious food), navigation (water transport, fuel cost of which is more than 5 times lower than that of road transport), tourism based on water sports, its use for industrial purposes and even generation of substantial revenue from export of pure mineral water; besides electricity generation.
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 extraction, collection, utilization and other forms of use, i.e. picking fruit from trees, cultivating land, collecting herbs, etc. Water resources, however, cannot be utilized and benefitted from in this manner. At the local level people can benefit from micro irrigation schemes, micro hydropower, tourism based on water sports and other industries. For example, cities use most electricity but will not be possible to generate there and electricity is generated in hilly rural areas that cannot consume much electricity.
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 federalism. People are already discussing division of water resources under federalism which is superficial without ensuring its optimum exploitation. Further, investment friendly environment will cease to exist due to interprovincial differences/conflict when project site is in one province and upstream areas and downstream areas are in other provinces.

In deciding to implement federalism it should be ensured that there are no obstacles in the optimum exploitation of water resources, its management and usage of the benefit for the betterment of Nepal and Nepali people (if possible even downstream riparian countries). Thus, it would be appropriate to hold discussions on the following points with regard to the water resources in federal state:

2.1 Drinking Water
We have age old practice of buying water source 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 work has started 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 the deprivation. In the meantime, local people have already put forward various demands for compensation, including sustained source of income for them. However, no arrangements have been made to meet their demand as it cannot be done by hiking the price of drinking water. If source of this project is to lie in a province with right to self determination other than Kathmandu valley, another province, the complexity of this project will get compounded.

What shouldn’t be forgotten in this respect is the heartrending incident of about 500 people’s untimely death in 2008 due to the outbreak of diarrhea and cholera in several districts of Far Western and Mid-Western development regions (Rukum and Jajarkot districts were the prominent ones) due to lack of potable drinking water and sanitation facilities. Besides, people are already getting killed in the dispute over water in several countries.

2.2 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. A reservoir project causes submergence (of land, forests and wildlife, tourist site, temple and infrastructure) and involuntary displacement; two negative externalities.

While the people living in the upstream areas will be deprived from the consumptive uses of water (like, futuristic sounding, hydrogen economy) in order to ensure specific quantum of water for the reservoir as the project’s electricity production will decrease if the quantum of water available get 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 to consumptive uses of water from Tila River.
A reservoir project also results in positive externalities in the form of downstream benefits due to augmented/regulated flow and flood control. Augmented/regulated flow during the dry seasons will make multiple cropping possible through irrigation. Such water can also be used for drinking and sanitation, fishery and animal husbandry, water based industry, etc. The downstream areas will also benefit from water sport based tourism, navigation as well due to watershed improvement. Moreover, flood control means saving of life and limb from the ravages of flood and from subsequent saving of expenditure in repair and rehabilitation.

If a water resource project involves two or more provinces, while people in downstream province will benefit as water will become available during dry season for the purposes of irrigation, etc., but the province where the project is located will suffer due to submergence and involuntary displacement. And people in upstream province will have to sacrifice in terms of consumptive uses of water. In such a circumstance, the province where the project is to be located and the people in the upstream province will hardly be willing to have the project implemented. This has amply been demonstrated by Narmada, Kaveri disputes in India and dispute between Sindh and Punjab provinces about Kalabagh project in Pakistan.

In this backdrop, it will be unfortunate if separate province/s is/are created for the southern plains (Terai). Because, there is plenty of agricultural land but is dependent on monsoon rains for farming (no water). It is not possible to avail adequate water in the dry season by building projects there. Similarly, most of the industries are located in this region, but generation of electricity in cost effective manner is not possible in Terai. In other words, hills and plains are interdependent on each other and complementarities exist. Actually, hills can become self reliant by building water resource projects, but same isn’t possible in the plains (as no significant head and storage space is available).

Involuntary displacement will also call for resettlement. The paradox is: construction of a hydropower project with reservoir is not possible in the plains and there is not enough land in the hilly area to resettle people displaced by such a project. Conversely, there is plenty of land for resettlement in Terai but if Terai is declared a separate province, resettlement of people from hills will be unacceptable. Tharus of the Western Terai have already refused to resettle the people displaced by the West Seti Project.

2.3 Hydropower
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 less than 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 it produces (275 MW). Even if the existing five development regions are to be declared as 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 offers higher rate, then a province could choose to export rather than supply to other provinces.

2.4 Delineation of boundaries
Rivers have been used to delineate most of the districts, zones and development regions of Nepal since long time. In various permutations of provincializaitons rivers have been used as boundaries. This will be unfortunate as two provinces may have different aspirations, needs and priorities, which will result in disputes forcing non-implementation of water resource projects.

3. Possibilities from the perspective of water resources
In the endeavor to explain possible perils, it has already been explained about the possibilities to metamorphose Nepal’s economy in the context of federalism putting up impediments in its path. Therefore, no repetition is warranted. On the other hand, it has not been possible to attain optimum exploitation of Nepal’s water resources under centralized unitary system. People are already debating about sharing and division of the water resources after provincialization. What needs to be remembered is that without ensuring optimum exploitation, what could be shared/divided in the situation obtaining at the moment is the division of flood during 4 months of rainy season and drought in 8 months of dry season. In the case of water resources, Nepal and her people can benefit only by ensuring optimum exploitation (ensuring no obstacles in the optimum exploitation of it), prudent management and sharing of the positive externalities from multidimensional uses of the water resources and bearing negative externalities equitably.
Due to lack of river basin approach, sites that can result in multidimensional benefit have been “given” away as projects such that Nepal will be deprived from benefits by 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.

In view of the above, the best solution for Nepal is to declare provinces on the basis of river basins of 3 large river systems as illustrated below:

As Mechi River has a limited catchment area, we can have one 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 Karnali-Mahakali province in west Nepal. The right to decide the optimum level of exploitation of the rivers of a province should rest with the concerned province by adopting river basin approach.

However, a Federal Constitutional Commission on Natural Resources at the center will have to be created to, among others, monitor/regulate work of provinces with respect to water resources in order to ensure optimum exploitation, effective management and best use and sharing of the benefits. Besides, this commission can also settle disputes that may arise amongst provincial or local governments. Despite our long experience in social, cultural and religious diversity in the country, in view of the inevitability of our interdependence, 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 already a provision in Interim Constitution for parliamentary ratification of, accession to, acceptance of or approval of treaties related to division/sharing of natural resources or of benefits thereof in Article 156. This provision will have to be enshrined in the new constitution for parliamentary ratification of, accession to, acceptance of or approval of treaties related to division/sharing of natural resources or of benefits thereof amongst provinces of Nepal or between a province of Nepal and a neighboring country in case a province with right to self determination is to be allowed to sign treaties with foreign countries.
4. Conclusion
Bhattarai cabinet has already been rendered care taker as PM Bhattarai is no more a member of CA. Besides, the country has also lost legislature; CA was also working as a legislature which is no more in existence without succeeding to promulgate a constitution. The care taker government is refusing to make way for a new government with executive authority unless consensus is reached regarding federalism and constitution. But the country is looking at a dead-end of one way street due to statements from the coalition in the care taker government that no constitution shall be acceptable without federalism and also that federalism, if it isn’t based on recognition of ethnocentric identity, will too won’t be acceptable. On the other hand, identity based federalism will overshadow identities of over 100 groups and deprive them from right to self determination availed to other groups. Further, implementation of federalism in Nepal on these lines will create second class citizenry as well as result in rule of minority over majority. In view of this, it is unlikely that people will accept federalism on the basis of identities of a few ethnocentric groups. This has amply been demonstrated by several opinion polls conducted by several institutions over several years.

On the other hand, how the issue pans out is of utmost importance even to downstream riparian countries like India and Bangladesh; besides, most importantly, Nepal. Conversely, all three countries will end up losing if provinces are created that will come in the way of optimum exploitation of Nepal’s water resources; deprive from positive externalities like flood control and augmented/regulated flow in dry season. Nepal and Bangladesh, with the per capita water availability of 9,122 m3 and 8,809 m3 respectively, are deemed richer, compared to the neighbors (2,961 m3 in Pakistan, 2,642 m3 in Sri Lanka, 2,259 m3 in China and 1,880 m3 in India). However, tragicomic situation of “water, water everywhere but not a drop to drink” exists. This is mainly due to, specifically in the case of Nepal, flood during 4 months and drought in 8 months. While the water table is declining at a rate of one foot per year averaged over the Indian states of Rajasthan, Punjab and Haryana, including the national capital territory of Delhi, more than 438,000 square kilometers. Bangladesh, on the other hand while being ravaged by flood regularly also is in need of irrigation to increase productivity.

It has been estimated that approximately 70% of dry season flow and 40% of annual flow of the Ganga River comes through Nepal; the terrain and topography of which affords opportunity to add temporal and spatial value in terms of flood control and provide augmented/regulated flow during dry season for irrigation; generating high value electricity (peak-in power) cost effectively as a byproduct. For the purpose, reservoir projects will have to be built in Nepal’s mid-hills. For which close cooperation between future provinces of Nepal, focusing on proper apportionment of both positive externalities and negative externalities, is sine qua non.

Therefore, 3 provinces should be created on the basis of watershed of 3 major river systems (river basin approach) in order to maximize benefit from positive externalities from water resources, not only for Nepal but also for downstream riparians like India and Bangladesh; for example it can become possible to travel in a steamer from Benighat on Prithvi Highway in Nepal through to Narayanganj port on Bay of Bengal near Dhaka of Bangladesh around the year.

Paper presented in Conference on NEPAL AS A FEDERAL STATE: LESSONS FROM INDIAN EXPERIENCE organised Jointly by Centre for South Asian Studies (CSAS) and Centre for Security Analysis (CSA)on August 30-31, 2012 at Hotel Radisson, Lazimpat, Kathmandu
Ratna Sansar Shrestha “Nepali”, FCA

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