Fundamental Principles required to be enshrined in the Treaty in Nepal’s interest
Nepal-India cooperation in water resource development over last 60 years holds little to be satisfied with. Past treaties/agreements, rather than being guideposts for creative action, have become sources of conflicting interpretations and disgruntlement. The Nepali side has been unable to articulate its interests/priorities or to transparently defend and develop its democratic constitutional provisions of parliamentary oversight. On the other hand, the Indian side has remained content with legalistic gains and zero practical achievements on the ground.
There are now good indications that the new regime in India has placed improvement in its neighbourhood relations as a priority and has begun to re-focus on meaningful development. If Nepal is to benefit from this she has to be clear about what her core national interests are and articulate them accordingly. She has also to keep in mind the value of our natural resources for ‘upstream-downstream’ linkages in national economic development as well as needs and rights of future generations of Nepali people.
Following agreements/treaties, and revisions thereon, related to water resources have so far been signed between Nepal and India:
Agreement on Koshi Project in April 1954
Agreement on the Gandaki Irrigation and Power Project in December 1959
Revised Agreement on the Gandaki Irrigation and Power Project in April 1964
Revised Agreement on Koshi Project in December 1966
[The initial agreements on Koshi and Gandaki signed by Matrika and BP Koiralas in 1954 and 1959 respectively had surrendered Nepal’s absolute territorial sovereignty over Koshi and Gandaki rivers, which were rectified by the revisions made during absolute monarchy under Panchayat system in 1966 and 1964 respectively.]
Mahakali Treaty in February 1996
In the process of ratification of the treaty a 4-point stricture motion was passed by Nepal’s parliament in October 1996 based on which this treaty will have to be amended to incorporate the stipulations in the 4-point stricture motion.
Power Trade Treaty in June 1997
[However, due to failure to ratify it by Nepal’s parliament it is in hibernation and comparable to Shakespearean tragicomedy now GoN again is seeking to sign entirely new Power Trade Agreement with GoI and had sent a draft in 2010 but was ignored and shelved by GoI.]
Draft “agreement between GoI and GoN on cooperation in power sector" sent by GoI in March 2014
[Nepal is resisted from signing it due to outrage created by it amongst general populace due to the imperialistic/hegemonistic content of this draft.]
In the mean time Investment Board of Nepal is preparing to sign PDAs for export oriented projects like upper Karnali, Arun III, etc. designed to deprive Nepal of much needed power and condemn her to medieval ages – forcing to export youth for employment who not only get economically exploited but also physically including getting raped and many women return home with unwanted pregnancies/babies.
Fundamental Principles to be enshrined in Treaty
Therefore, it is high time to establish fundamental principles to be enshrined in a framework treaty on water resources between “upstream-downstream” neighbouring countries such that both are in a win-win situation, which inter alia (not intended to be exhaustive, though) are as follows:
Investment in Hydropower
• Government of Nepal and India to implement certain projects jointly, with India providing certain proportion of capital cost as grant and remaining to be financed with low interest debt to be provided by India.
• Nepal to allow Indian investors to implement hydropower projects in Nepal with 100% investment
• This shouldn’t preclude implementation of projects by investors from Nepal and third countries
• Efforts to be made to implement such project at competitive cost, transparently to ensure generation of power cost effectively
• Projects jointly developed by Nepal and India with Indian government financing (grant and debt) to be fully owned by government of Nepal.
• Projects implemented with Indian private sector investment or FDI from Nepal and other countries to be owned by project companies.
• An entity of government of Nepal (perhaps named “Nepal Electricity Trading Incorporated”) to purchase all electricity generated by all projects developed by private sector from any country built on the rivers of Nepal.
• Nepal to use such electricity to meet her requirement to achieve, initially, normal economic growth and eventually accelerated economic growth [Nepal now is in suppressed economic growth scenario].
• Remaining electricity to be exported to India.
• This shall not preclude Nepal exporting electricity to third counties.
• Nepal and India to remove barriers in the trading of electricity and do away with licensing and taxes/duties in the cross border trading of electricity.
Tariff for purchase by “Nepal Electricity Trading Incorporated”
Nepal Electricity Trading Incorporated to purchase all such electricity at tariff, which will be fixed, based on the principles of basic minimum cost plus reasonable profit to owners of the project.
Transmission of Electricity
• All export and import of electricity to be routed through Integrated National Grid of Nepal (no dedicated transmission line to be built for any specific project) and record such exchange to be maintained on both sides of the border by installing requisite metering facility.
• If necessary, India to build DC/AC conversion facility at her own cost.
• Both Nepal and India agree to non-discriminatory access to interconnection for all participants in the trading.
• Quantum and parameters of supply, points of delivery to be mutually agreed
• Nepal to export electricity at prevalent commercial rate or avoided cost
• The tariff shall also reflect time of use (time of day and seasonality) concept – which would range from peak tariff for peak energy (peak hours or high demand season) to low tariff for off peak energy (off peak hours or low demand season).
Reservoir projects results in positive externalities like:
• flood control and
• lean season augmented flow, which will avail water for drinking and sanitation, irrigation, navigation, etc. in in India (even Bangladesh in some cases) during dry season.
Nepal will also suffer from negative externalities like:
• involuntary displacement and
• restriction on consumptive uses in upstream reaches.
Nepal will lose land twice in inundation and for resettlement/rehabilitation of displacees. Therefore, assessment has to be made to monetize cost of negative externalities and benefit of positive externalities. India will be required recompense Nepal for negative externalities and share benefit of positive externalities.
If it is not possible to monetize cost of negative externalities and benefit of positive externalities, since GoI is generally unwilling to share any such data, the payment from India to Nepal will have to be based on the quantum of lean season augmented flow that India receives on the basis of international precedents (e.g. Lesotho Highland Water Agreement).
Firm commitment will have to be made by India that there shall be no restriction on consumptive uses of water in the upstream reaches.
After implementing reservoir projects like Pancheshwar or Sapta Koshi High dam, India will have to provide inland navigation facilities in and through her territories for Nepal including access to high seas
Himalayan range and the mountains of this region consist of young mountains. Therefore, rivers of this region carries heavy silt load, which will require de-commissioning of storage/reservoir projects after expiry of the lives of such dams. Owners of the projects are required to arrange necessary budget for the purpose by setting aside certain reserve annually to de-commission dams which will be placed in escrow account acceptable to GoN.
Necessary security for all physical infrastructures built in the territory of sovereign Nepal will be provided by GoN; no foreign security to be allowed inside Nepal.
Ratification of such a treaty by Nepal’s parliament by 2/3 majority will be mandatory under article 156 of Nepal’s Interim Constitution.
Projects cannot be built any more in the lines of Koshi and Gandaki projects in the territory of sovereign Nepal which inundate land in Nepal, also displacing the inhabitants and while India benefits from flood control and water for irrigation. Besides, it is also not possible to leave the control and security of such projects in the hands of India (e.g. in Koshi barrage). Further, in order for Nepal to really benefit by exporting power, Nepal will have to be able to buy cheap power from good projects directly and export at premium rate based on demand after using electricity necessary for Nepal to achieve normal economic growth and, subsequently, accelerated economic growth. Moreover, reservoir projects have to be built as multipurpose projects and downstream beneficiary will have to “pay” upstream riparian for suffering from negative externalities and providing positive externalities to the lower riparian.
Otherwise, Nepal can always build reservoir projects tailored to her own need with lower dam height that require submergence of smaller quantum of land and displacing fewer people.
Published in “Peoples Review” weekly of 31st July 2014.