Friday, May 30, 2014

Mr Bharat Upreti
Former Ad Hoc Judge, Supreme Court, Nepal

Bharat Upreti jee

Writing an article on “roadmap for reform of judiciary under crisis” in Himal weekly of 25-31 May 2014, you have stated that “due to interim order issued by a supreme court bench comprising single justice, Arun III project of 450 MW was ‘wrecked’” (exact word you have used in Nepali is तहसनहस). It is very strange indeed at it is coming from a person who has been an ad hoc judge of Supreme Court twice and also for a lawyer who pleaded in that very case representing NEA, verdict of which was delivered by Justices Hargovinda Singh Pradhan and Keshav Prasad Upadhyay in the first week of May 1994.

I have checked the verdict published in Issue 4, Vol. 36 of Nepal Kanoon Patrika and it is clear that no “interim order” was issued in that case filed by Gopal Siwakoti and Rajesh Gautam; neither by one judge nor by 2 judges. Fact of the matter is that it was a case filed under RTI and the court had simply said that if citizens of Nepal demand information, it should be provided, following due process and through proper channel. The verdict didn’t at all say that the project should be “cancelled” neither as final verdict nor issuing interim order for the purpose.

Therefore, what you said in that article is completely incorrect and it could even amount to contempt of Supreme Court. I am prepared to stand corrected if you could cite any other judgment that “wrecked” the said project.

However, it is true that the project did get cancelled, which, however, isn’t due to the writ petition or interim order of the Supreme Court as I have mentioned above. The project was cancelled by the World Bank in August 1995 immediately after James D Wolfensohn became its president. Besides financial reasons, it was cancelled as GoN had breached a covenant restricting Nepal from implementing projects of capacity bigger than 10 MW. The covenant specifically stipulated that “NEA … would seek IDA’s specific consent before undertaking any investment projects that would increase generation capacity by more than 10 MW capacity or transmission projects costing more than $ 3 million. In granting such a consent, IDA would need to be satisfied that the project is economically and technically justified and part of the LCGEP, that NEA has the financial and managerial capacity to undertake the project without delaying implementation of the Arun III or the rest of its ongoing program, that the project is consistent with HMG’s public expenditure program and macroeconomic framework.”

As you were representing IFC in Khimti project at that time you should have been aware of the fact that GoN had signed PPA for 60 MW Khimti project in March 1994, breaching this very covenant. Besides, Arun III project was highly costly, estimated to cost more than $ 5,000/kW; against average cost of $ 2,000/kW for small and medium sized projects and around $ 1,000/kW due to economies of scale (SJVN has estimated Aurn III, at the same site, with installed capacity of 900 MW to cost $ 1,000/kW for export which people of Nepal are opposed to).

You also may not be aware of the fact that had Nepal built the costly Arun III project, Nepal would have been suffering from more load shedding now than what we have now. Because due to cancellation of Arun III following projects got built:

Nepali Electricity Authority built Kali Gandaki 'A' project, 144 MW from ADB fund earmarked for Arun III and Middle Marshyangdi project, 70 MW from KfW fund earmarked for Arun III

Besides Independent Power Producers built following projects as the negative covenant restricting implementation of projcts begger than 10 MW died with Arun III: Khimti 60 MW, Bhotekoshi 45 MW and Chilime 22 MW.

Moreover, NEA has built Modi 14.8 MW from its own sources.

In this manner a total of 355.8 MW was built instead of just 201 MW. Had Arun III not been cancelled, only this project would have been built due to negative covenant and load shedding hours now would have been much more longer.

You have also specified that the installed capacity of Arun III project as 450 MW which is also very far from the truth. Installed capcity of the proejct, even when hearing of the case was going on in supreme court, was 201 MW only – first phase of 402 MW. It was during the time when Girija Koirala was PM and Mahesh Acharya was state minister of finance, that the capacity was down sized to 201 MW.

With best regards,

Ratna Sansar Shrestha

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