Thursday, March 8, 2018

Neocolonial Path to “Power”

Portugal is the first country that established colonies in modern history (in 15th century), followed by Spain, France, England, Netherland, etc. Even today there are 61 colonies, including Puerto Rico (US colony). Strangely, in the latest plebiscite held on June 11, 2017, only 1.5% Puerto Ricans voted in favor of independence; voter turnout was 23%.

Besides, to satiate their imperialistic tendencies and expand empires, colonies were established with the aim of, inter alia, exploiting resources of colonies to be used for the prosperity of the “empires”. Colonial powers extracted and exploited resources recklessly and at infinitesimal cost (using cheap or slave/conscripted labor of the colonies) and sold such resources at huge profit or used for industrialization and development of the respective colonialists. Basically, colonial powers would appropriate primary commodities of the colonies.

Resource Colonization
Looking back, a huge quantum of natural resources of colonies were extracted and siphoned off by colonizers, basically squeezing economies of the colonies. For example, economist Utsa Patnaik opines that Britain drained more than 9 trillion sterling pounds from India over 173 years, equivalent to present day US $ 12.38 trillion (Global Research, February 2018).

Nowadays there are fewer instances of colonial powers using colonial approach of extraction and exploitation of natural resource. In other words, resource colonization has become a rare phenomenon. However, innovative ways are being devised for colonization of resources. One example is export of primary commodities at dirt-cheap rate from small neighboring countries to big neighbors.

Examples: Arun 3, UKP, etc.
Nepal has issued license for export-oriented hydropower projects like Arun 3, Upper Karnali, etc. These would, obviously, export electricity – a primary commodity – depriving Nepal’s economy from much needed source of energy; perpetuating dependency on fossil fuel – a modern source of energy. It will be silly to oppose export of electricity if Nepal’s demand, including latent demand to switch energy source from fossil fuel and firewood, for electricity has been met to saturation level. Unfortunately, it cannot be asserted as electricity as a source of energy comprises only 3.32% and renewables 3.03%, while traditional sources of energy like firewood, agro and animal residue comprise about 77% and imported modern source of energy like petroleum product and coal about 17%.

However, unfortunately, Nepal is becoming a victim of neocolonial approach; the problem is more of self-inflicted nature. Because, Nepali hydrocrats are happy to tread neocolonial path by allowing implementation of export-oriented hydropower projects to a monopsony market. The hydrocrats don’t tire of salivating at the potential prosperity that export of electricity would afford by replicating the so called “Bhutan” model; completely forgetting that Bhutan is on neo-colonial path: harnessing her water resource for export of electricity to India.

Bhutan is Source of Power for India

Export of electricity, a primary commodity, also amounts to resource colonization. Bhutan, a protectorate of India (there is no point in beating around the bush about it), is supposedly becoming prosperous by exporting electricity to India. It is crystal clear that Bhutan is not an independent country comprising sovereign people, especially regarding defense and foreign affairs.

It doesn’t come as a surprise that the people in Bhutan aren’t proud of this geopolitical fact of life; nor care to be reminded of it. In their resentment with it, with which they are destined to live till some distant future, they even try to equate themselves to Nepal thereby attempting to pull Nepal (a sovereign and independent country) down a notch or two to their own level. There is no point in being upset with them when people in Nepal, professing to be patriots, go about advocating that Nepal must metamorphose into another Bhutan by replicating Bhutan model! Bhutanese people must be awestruck to learn of people in Nepal wanting to stoop to their level – demonstrating their willingness to cede Nepal’s sovereignty and independence, which Bhutan would give anything to achieve. The protagonists of replicating Bhutan model in Nepal need to wake up from their slumber induced by the warmth of wet bed and remember that once the mattress cools off it will become very uncomfortable as is being amply demonstrated by what is transpiring in Bhutan.

However, as Bhutan plans to be the source “power” for India, Bhutanese people must feel magnanimous. For a country as tiny as Bhutan, being able to “power” India – the giant neighbor must be a matter of great pride.

Wield “Power” over India
The proponents of Bhutan model in Nepal are going about saying that Nepal can wield immense power (not political power) over India if Nepal were to export power in huge quantum, as the power-switch will be in Nepal’s control: just turn off the switch to bring India down to her knees! What a silly dream!

It is beyond the comprehension of such naïve people that India will easily circumvent such possibility by “demanding” to deploy her own security personnel in such project(s). Most people are not aware that 10,800 MW Karnali Chisapani project was shelved in 1970s by late king Birendra upon learning of Indian plan to deploy Indian security force in the project (are recounted by Jagat S. Mehta former secretary of ministry of external affairs of India, in his paper on “India-Nepal Relations: A Victim of Politics” published in the book titled India-Nepal Relations: The Challenge Ahead in 1996). Clearly, Nepal will not be in a position to bring India to her knees by controlling power-switch, because Indian security personnel will control such device.

Moreover, in the case of implementation of export-oriented projects by foreign investors, the power-switch will be controlled by the proponents of the respective projects, not by functionaries of GoN. Examples of Upper Karnali and Arun 3, under “development” by GMR and SJVN respectively suffice. The power-switches of these power plants, if built will be controlled by these corporates. These naïve people need to remember that Koshi and Gandak barrages built in sovereign territory of Nepal are under control of GoI.

Power is Input for Economic Activity

But gems of truth are coming from Bhutan itself. Kuensel online of July 22, 2009, writing under the heading “Power-profit home advantage”, has stated “contrary to existing notions, a new study says it is economically more beneficial for Bhutan to supply power to its industries than export to India. The study, by the ministry of economic affairs (MoEA) and the royal audit authority, compares revenue foregone by the government in not exporting subsidized electricity against the money gained as taxes from 15 major industries, which represent 95 percent of industrial power consumption. Here, in spite of the subsidy, the net benefit is about Nu 64 million. In the second model, it compares cost of production and distribution of electricity to the tax revenue gained from industries. Here again, there is a benefit of Nu 152.8 million over and above cost of production.”

“Electricity is the only plentiful raw material, which can be used by our industries to compete with external competitors by value adding on the reasonably priced power,” said the then economic affairs minister Lyonpo Khandu Wangchuk. Minister Wangchuk was echoing ground reality obtaining in Nepal.

The then economic affairs secretary Dasho Sonam Tshering is reported to have said, “Value addition on both electricity and local raw materials, like in the case of Penden and Dungsam cement plants, will be more sustainable in the long run, even if electricity prices change in the region”. He even is reported to have alluded to Norway, which “also used its hydropower to initially bankroll its industrial development through power intensive metallurgy and fertilizers”. GoN formulated hydropower policy to open the sector to private sector with the help of Norwegian experts, but failed to learn from the example of Norway.

Nextant USAID-SARI/Energy study conducted in 2003 has concluded that average economic value addition of electricity in the industry is 84 US¢ kWh. In this backdrop it is sheer foolishness to dream of prosperity by exporting electricity, while same, costing about 8 US¢, can result in economic value addition by about 10 times. This is why this scribe calls export of electricity reverse resource colonization.

Power for Domestic Consumption
On the other hand export-oriented development of hydropower in Bhutan has resulted in different negative externality. Under the headline “Power crisis looms large over Bhutan?” The Economic Times has reported, on June 16, 2008 that “A severe power shortage may hit Bhutan in view of new industries readying up to kick start operations even as India is banking on borrowing electricity from the Himalayan country by 2020.” It goes on to add that “Bhutan may talk of thousands of megawatts of power in the next few years but according to Bhutan Power Corporation Limited (BPCL) officials, the country will face a deficit in that period because a lot of upcoming industries will need power to operate.” BPCL executive director K B Wakhley has been reported to have said, “if all the industries in Pasakha and Phuentsholing come on stream, there will be a shortage of power," said.

Like ostrich, hydrocrats of Nepal are hiding their collective heads in the sand, but it will not make the potential disaster vanish and, therefore, people need to review this modality of hydropower development not only in Bhutan but also in Nepal.

Financially Unsustainable for India
Due to the unique geopolitical relationship between India and Bhutan three projects so far built in Bhutan, aggregating a capacity of 1,416 MW, are owned by Bhutan but funded by India through 60% grant and 40% soft loan touted as the ‘inter-government model’. However, Indian government has discovered that this is not a sustainable model. India has already reached financing fatigue after financing 1,416 MW under 60/40 model.

Reporting under the heading “India Bhutan hydropower cooperation fraying at the edges” Beth Walker reported on October 4, 2016 (Third Pole) that “60% grant component and 40% loan, have been reversed with loan component now comprising 60-70%” and adds that “hydropower has contributed to a steep rise in Bhutan’s debts, and the report notes Bhutan is ‘among 14 other countries that are fast heading towards a debt crisis.’”

In Nepal’s case, in the first place India has not offered such financing modality to Nepal. The simple reason is: Bhutan is an Indian protectorate. Secondly, financing a few thousand megawatts under such a model for about half a million people may be simpler, but replicating it for Nepal would be impossibility. Because for a population of 28 million, India will have to finance 52,864 MW under this modality (60% grant 40% soft loan), which would cost about US $ 53 billion at the rate of US $ 1,000/kW.

Paucity of Market in Nepal

Proponents of Bhutan model assert that Nepal lacks requisite market for her electricity generation potential of 43,000 MW. What such naïve people don’t forget is that Nepal’s per capita electricity consumption in 2014 was 139 kWh and even to reach the level of South Korea, where it is 10,497 kWh per capita, Nepal would need 85,598 MW according to a presentation made by current MD of NEA on February 22, 2018. Lest it be forgotten that economic status of Nepal and South Korea was at about same level about 4 decades ago and now Nepal youth vie for employment there, not the other way round.

Smarter Bhutanese
Under Article 8 and Article 9 of Chukha and Tala agreements respectively, Bhutan government sells only the surplus power from these projects, (over and above that required for use in Bhutan), although both of these projects were financed by government of India (GoI) with 60% as grant and 40% loan. Whereas, projects are designated as export-oriented in Nepal, depriving Nepal from much needed energy.

ADB report states that Bhutan has already achieved 100% electrification in 2015, whereas only about 50% of the people in Nepal have access to electricity. Similarly, industries in Bhutan consume 80% of the domestic power consumption while it is only about 36% in Nepal. Exporting electricity will make sense only after Nepal succeeds to replicate Bhutan’s profile of electricity consumption. At the moment most industries in Nepal are operating at 50% capacity and no new industry established for lack of electricity supply.

Most importantly, ownership of projects built with Indian funding is vested in Royal Government of Bhutan. It means that any and all profit earned by these projects enrich treasury of Bhutan. However, Bhutan model has been prostituted (with due respect to sensitivity) in Nepal, as GoN will not own the export-oriented projects; there will be flight of profit earned by such projects. This is the secret of Bhutan achieving prosperity that Nepal’s hydrocrats don’t seem to comprehend/appreciate.

Export of primary commodity like electricity, which is essential to “power” Nepal’s economy, including to displace imported fossil fuel and highly pollutant firewood, is tantamount to reverse colonization of resource, in the hope of forcing India to her knees that is naiveté at it best. Such people ignore the fact that input of electricity has potential to add value to the economy by ten times the cost input. People that salivating at Bhutan model, fail to comprehend that it has become unsustainable for India and she has already revised the model (70% loan, 30% grant), just to ensure that Bhutan doesn’t breach her special relation with India. Besides, India has not shown interest in replicating the Bhutan model in Nepal.

Hence, it is high time for the hydrocracy in Nepal to abandon naiveté and grow out of their shortsighted juvenile vision for Nepal’s hydropower development. Lest it becomes necessary to have to point out that the emperor isn’t actually wearing any gorgeous royal gown, as his subjects are led to believe; rather he is wearing nothing (just in birthday suit)! It is a recurring phenomenon and is applicable to all neo-emperors of decade old republic of Nepal too and their loyal naïve subjects.

Nepal should abandon neocolonial path before it is too late even to repent. Nepal’s main objective should be self-reliant energy security including to displace unclean/un-renewable energy sources ranging from fossil fuel to firewood. Bhutan model, the real one, has its merits and can be adopted, on the condition that Nepal doesn’t have to become an Indian protectorate.

Ratna Sansar Shrestha, FCA

Published in People's Review on March 8, 2018