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

Saturday, May 10, 2014

Reverse Imperialism Abetted Colonization of Water Resources

Mother Nature bestows certain natural resources to every country, harnessing of which not only sustains the country’s economy, but also leads to prosperity. As a part of natural justice all natural resources aren’t bestowed to every country. Forest used to be touted as Nepal’s wealth. However, forest has dwindled and country is yet to prosper (except for smugglers and their powerful benefactors). Similarly, Nepal is being publicized as rich in water resources. However, only one-fourth of the populace has access to piped water from which water rarely flows and three-fourth has yet to see pipes/taps. Therefore, easy and affordable access to potable water has become a distant dream; diverting resources for medical treatment with heavy toll on productivity of human resources – even premature death linked to unclean water (recent sickness and death from Hepatitis and Jaundice in Biratnagar is a case in point).

Colonization of natural resources
Exploitation of natural resources of host country for the development of another country is colonization of natural resources; practiced by imperialists till 20th century. India’s natural resource was exploited by British Empire in their interest till Indian independence, as was practiced by other imperialists. No colony has prospered under that format. However, the imperialists exploiting natural resources of the colonies have flourished.
Resource colonization of Nepal, a country never formally colonized, started with the construction of “Sarada” barrage by British India in 1920 to meet requirement of north India, followed by projects built under Koshi and Gandak treaties in 1950s. These barrages resulted in inundation of land in Nepal, involuntary displacement of the inhabitants and also restriction on consumptive use of water in the upstream reaches ranging from irrigation to futuristic hydrogen economy – the negative externalities. While India reaped the benefits from flood control and irrigation of their parched land (positive externalities). This is the best example of colonization of Nepal’s water resource.
Same is being attempted in the name of projects like Pancheshwar, Koshi High Dam, etc. (reservoir projects) which will result in Nepal internalizing negative externalities and India reaping positive externalities. An important distinction is that the barrages built in last century were meant for spatial transfer of water (from plenty to paucity) and, therefore, the magnitude of negative externalities was relatively low compared to the same that will be caused by the construction of Pancheshwar, Koshi High Dam, etc. to be built for temporal transfer of water (from wet season to dry season).
Mindset amongst the hydrocrats of India is understandable, while that of Nepal is startling. Although Mahakali treaty stresses equal right to water, India plans to irrigate 1.6 million hectares while only 93,000 hectares will get irrigated in Nepal after completion of Pancheshwar project. It is natural for hydrocrats of India to endeavor to optimize benefits to India and cannot be faulted for being patriotic towards their motherland. However, when hydrocrats of Nepal surrender Nepal’s interest in this manner, one has to pause and ponder. Why are Nepali hydrocrats happy to surrender Nepal’s national interest!

Colonization of hydropower
Although, Nepal is said to have huge hydropower potential, but she is suffering from load shedding since last few decades, which is limited to well-to-do urbanites, mostly, as only 40% of the population has access to electricity from NEA. Moreover, Nepal’s youth are emigrating abroad for employment for want of jobs in Nepal for lack of industrialization, which isn’t possible without power. Import of petroleum product this year is anticipated to exceed Rs 120 billion, which could have been avoided by electrification of transportation. Something simple like displacement of firewood for cooking in rural areas (83% of the country) by electricity could not only have curbed deforestation but could even have positively impacted rural people’s (especially that of homemakers’) lives by saving them from indoor pollution which is making them sick (entailing huge expense in medical treatment), less productive and even death. An interesting facet of this phenomenon is that Nepal could have generated 430 million working days in a year if rural folks didn’t need to spend time collecting firewood. There are many other meaningful uses of electricity, which have been completely ignored by the hydrocrats who want people in Nepal to chase the mirage of becoming citizens of a rich country by exporting power, comparable to Saudi Arabia.
If one is to calculate ballpark number for electricity requirement of Nepal, with 1,094 MW used by 40% of population last fiscal year, Nepal would have needed 2,700 MW for 100% electrification in that period. Additionally, in order to generate employment for 3 million youth that have emigrated (without accounting for those who have emigrated for employment to India) she would need another 1,000 MW for industrialization and similarly 500 MW for electrification of transportation which would mitigate balance of trade and payment deficit. Further, just to displace LPG from urban, semi-urban and peri-urban kitchens another 1,000 MW would be required. In sum even without planning to displace firewood from rural kitchens (which would have been highly over-ambitious), Nepal could have used 5,200 MW (a ballpark number) last year itself. Therefore, it is criminal on the part of hydrocrats to plan to export power depriving Nepal’s economy and Nepali people from much needed electricity, as Nepal will require about 10,000 MW in 5 years’ time.
Because of such wrong focus, these very hydrocrats now have to pacify people suffering from power crisis that it will be mitigated by importing power from India (northern India which is suffering from huge power deficit!). In the meantime they are preparing to allow foreign investors to build hydropower projects for export (namely Arun III, Tamakoshi III, Upper Marshyangdi-2 and Upper Karnali) that would generate high quality power, totaling 3,050 MW, at cheap rates by signing Power Development Agreement. Again, it is smart on the part of Indian patriots to get clean power from Nepal at dirt cheap rate. But same cannot be said about Nepali hydrocrats who are hell-bent on exporting high quality power cheaply while arranging to import expensive power in the name of mitigating power crisis in Nepal. This is a clear and concrete disconnect, or colonized intellectuality.

Intellectuals afflicted by Reverse Imperialism
Nepal was never colonized, excepting Indian wish to exercise colonial power over Nepal using special relation supposedly “enshrined” in 1950 treaty. Indians don’t overtly reveal their intention to colonize Nepal’s rivers, though. But politicians of Nepal are magnanimous towards India, as was exemplified by a former Premier Krishna Prasad Bhattarai acceding that Nepal’s rivers are “common” when he visited New Delhi in 1990; going against Harmon Doctrine and the concept of “absolute territorial sovereignty” accepted by India in both Koshi and Gandak treaties and disproving people’s belief that he was a patriotic leader. With him appeasing Indian interest in Nepal’s water resources, the embargo also did get lifted as a result of his efforts which was imposed to force the late king Birendra to accept another unequal treaty in 1989 containing references to “commonly shared rivers” besides requiring Nepal to come under Indian “security umbrella”. But people of Nepal are lucky, as Bhattarai couldn’t formalize/legalize the commonality concept by executing another disgraceful treaty to Nepal’s detriment as he lost in the general election. Very few people know that India had imposed the embargo as late King Birendra had refused to sign the treaty proposed by India, with assurance of full support to the then regime against the political parties that were agitating for “democracy”. Common people had started to support the agitation as their lives were becoming unlivable due to the embargo. But late king Birendra preferred to become constitutional monarch rather than surrender Nepal’s sovereignty to India over and above natural resources.
Makes one wonder why such mentality on the part of hydrocrats of Nepal – their eagerness to allow India to colonize Nepal’s water resources! Indians colonizing can be termed imperialistic. But Nepali hydrocrats seeking colonization of Nepal’s rivers by India means they are afflicted by “Reverse Imperialism.” In sum, reverse imperialism on the part of Nepal’s hydrocrats is abetting colonization of Nepal’s Water Resources.

Published in Spotlight News Magazine of Sunday May 10, 2014.

Tuesday, May 6, 2014

Presentation to Prime Minister re Upper Karnali

A delegation comprising members of Karnali River Basin Conservation Society met with prime minister today morning, to draw his attention towards the proposal for wrong implementation of Upper Karnali project as a run of the river project (900 MW), which should be developed as a storage project (4,180 MW) not only to generate peak energy but also to provide fresh water for drinking and sanitation, irrigation and even navigation.

The delegation drew his attention towards MoU signed with GMR, which is detrimental to Nepal’s interest. However, he took things negatively and jumped to the conclusion that people are trying to obstruct development work. He alos referred to cancellation of Arun 3 by World Bank in 1995 and ascribed present load shedding to the cancellation. He wasn’t aware of the fact due to cancellation of Arun 3, Nepal has succeeded to add 346 MW to the system instead of just 201 MW. He was basically parroting the statements made by the likes of Dr Ram Sharan Mahat, present finance minister.

It was rather saddening. He seemed to be aware of need of electricity for industrialization, but he didn’t see any wrong in exporting power, which would deprive Nepal of the much-needed power.

The silver lining was his admission that he has not studied the relevant documents.

Thursday, May 1, 2014

IFC permitted to issue Rs 50 billion in local currency bonds

Dear colleague

Captioned news was published on 3rd April about granting of approval by GoN to International Finance Corporation (IFC), a member of the World Bank Group, to issue local currency bonds of up to Rs 50 billion (US$ 500 million) for five years. Following i had sent my comment on the topic too NNSD which wasn't deemed publishable by its moderator Arjun Dhakal. Therefore, i am sending my following comments to you directly.

As it is a local currency bond, it will not entail foreign exchange risk, due to that very reason only people and agencies from Nepal will “buy” these bonds as buyers from overseas would be averse to the exposure to foreign exchange risk.
The above “development” is very strange in the backdrop of the fact that policy/decision makers (politicos-bureaucrats) as well as private sector of Nepal proclaim that Nepal is a very poor country and go all over the world armed with begging bowl for financial assistance from bilateral and multilateral agencies. This move flies in the face of the oft repeated statement that Nepal is cash strapped poorest of the poor country.

It is actually appreciable that a multilateral agency like IFC as well as GoN has accepted that Nepal isn’t as poor as have been portrayed by the decision/policy makers as well as bilateral and multilaterals.

The matter of grave concern lies in the fact that a world class institution like IFC is going to charge “spread rate” approved for bank and financial institutions of Nepal by Nepal’s central bank to cover operating cost of IFC. There are two aspects that must be noted. One, IFC is going to “charge” to collect money from Nepali people to invest in Nepal. If policy/decision makers had vision, they would have formulated policy and developed institutional mechanism such that the infrastructure projects in Nepal do not have to pay additional “spread” to IFC; channel fund from people in Nepal for investment in projects directly. Secondly, IFC being populated by people enjoying 5-star facilities, its operational cost will be relatively very high even compared to CEOs of Nepal’s banks who draw salaries in vulgar amounts, will not be in a position to relax the spread that it requires. Therefore, Nepal and Nepali people will get cheated in two ways: the bond purchaser will be afforded relatively low rate and infrastructure projects will be charged interest plus exorbitant “spread” of IFC.

What would have been appreciated by the people below poverty line in Nepal is lending by IFC from its own coffers in local currency at rates that are softer than charged by banks in Nepal.

With best regards,


Ratna Sansar Shrestha, fca
Senior Water Resource Analyst