J & K vs New Delhi

Even as India and Pakistan race to finish massive hydroelectric projects on shared Himalayan rivers, the Jammu & Kashmir government is trying to estimate how much money it has 'lost' due to the half-century-old Indus Water Treaty.

For the first time, the Jammu & Kashmir government has started a full-fledged process to quantify the losses it claims to have suffered due to the Indus Water Treaty, signed between the New Delhi and Islamabad governments in 1960. In June, the state body in charge of electricity, the Power Development Corporation (PDC), invited proposals from consultancies within and outside India to assess the treaty's impact. 'We have been arguing about the losses to J & K state due to the IWT but we do not have accurate figures available with us to substantiate our claim,' says Iftikhar Ahmad Kakroo, deputy managing director of PDC. 'So we sought bids from reputed consultancies around the globe to assess this loss on a scientific basis.' In fact, the state government's new moves are only the latest in a bilateral fight that is in the process of heating up significantly, calling into question the sanctity of the half-century-old agreement.

Post-Partition, water-sharing was a major source of contention for India and Pakistan. The issue was resolved with arbitration by the World Bank (then called the International Bank for Reconstruction and Development) that resulted in the Indus Water Treaty, which puts restrictions on how the two countries can use their water resources. Out of the six rivers in what is called the Indus basin, India has exclusive rights over the waters of three major waterways that flow through the plains of Punjab state before entering Pakistan: the Ravi, originating from Rohtang pass in central Himachal Pradesh; the Beas, also originating from central Himachal; and the Sutlej, which begins in Tibet. Pakistan, meanwhile, has rights to three large rivers that flow first through J & K: the Indus, coming from Tibet; the Jhelum (or Neelum, as it is referred to in Pakistan), originating in southeastern J & K; and the Chenab, which starts in Himachal.

Since it was signed, the treaty has withstood two wars and numerous other conflicts and confrontations – although not without frustrations. Many in J & K feel that the agreement restricts the state from fully exploiting its hydro resources, both for irrigation and for power generation. Experts say the state has a potential to generate some 20,000 megawatts of electricity, but so far has only managed around 1500 MW because the treaty disallows the state government from damming any of these three rivers.

'The harnessed hydro-electricity potential constitutes just 7.5 percent of the assessed potential, with 92.5 percent remaining unharnessed,' says H A Gora, an economics researcher who has studied J & K's hydro potential. Over the course of six decades, suggest some, the loss to the state in terms of development of industry, power and agriculture could be nearly USD 4.5 billion. 'This loss of development is a fundamental question,' says Nisar Ali, an economist in Srinagar. In 1996, Ali put a proposal before the state government to claim USD 1.8 billion in compensation from the New Delhi government on account of the Indus Water Treaty, though no such request has ever formally been made.

Race for legitimacy

Following the PDC call for consultants, only one company submitted a proposal, the India office of a British company called Ms Halcrow. Due to the poor response, the state government is currently reassessing how to go forward, and will probably re-advertise the contract. Once the project does get underway, J & K officials hope that a loss assessment by technical experts will not only reinforce the state's claim of decades' of losses, but will also build pressure on New Delhi to act – perhaps by offering compensation, perhaps by requesting compensation from Pakistan or, as pushed by some in the opposition, perhaps even by relaxing some of the treaty-related regulations.

Some political parties in J & K have been pushing for the Indus Water Treaty to be scrapped outright, terming it 'discriminatory'. After assuming office in 2009, Chief Minister Omar Abdullah demanded a review of the treaty, suggesting at one point that the agreement had become 'outdated'. Since then, however, Abdullah has gone silent on the issue. The opposition Peoples Democratic Party (PDP), meanwhile, alleges that three generations of Abdullahs, as the head of the National Conference, have sold out the state's hydro resources at dirt-cheap rates. Despite the state's huge hydropower potential, J & K actually faces regular acute water shortages, which in turn have caused power scarcity and poor irrigation facilities. Each year, as water levels fall during the winter months, the state is forced to purchase power from other Indian states, a burden on the state's exchequer said to amount to more than USD 675 million per year.

The problem is exacerbated by New Delhi's perceived neglect in helping J & K construct hydroelectric projects. For instance, the Srinagar government had secured funding from various international financial institutions to construct the Kishanganga hydro project on the Jhelum/Neelum River, but New Delhi has thus far not given any counter-guarantee to the companies. This has forced the proposal to be handed over to National Hydroelectric Power Company (NHPC), a government-owned company. Due to legalities, this arrangement significantly cuts down on the amount of potential royalties available to the state government – in the case of Kishanganga, just 12 percent of any eventual profit.

There is far more at stake than royalties surrounding the Kishanganga, however. For New Delhi, after all, the water-related tussle with Srinagar is no comparison for the ongoing skirmish with Islamabad. New Delhi and Islamabad have been increasingly confrontational over water usage in Kashmir, particularly on the Indus, Jhelum/Neelum and Chenab rivers. In 2005 and 2008, Islamabad raised objections over the construction design of the Baglihar dam on the Chenab, alleging it violated the Indus Water Treaty. The issue was later referred to the World Bank, which eventually recommended that India go ahead with the project but also allow Pakistani experts to inspect the dam and its construction. The second phase of the Baglihar project was inaugurated by Prime Minister Manmohan Singh in 2008. The Baglihar standoff was followed by Indian protests over the construction of the Diamer Basha dam project on the Indus in northern Azad Kashmir, about 100 km from Gilgit. However, Pakistan officials brushed off the concerns.

Since then, the two countries have engaged in a veritable construction race, particularly on the Jhelum/Neelum. While India goes forward with the contentions Kishanganga project (a 330 MW installation worth some USD 740 million), Pakistan is building a USD 2.16 billion, 969 MW scheme on its side of the river. These projects, 70 km apart on the same river, have been commissioned and are being implemented by their respective authorities. Incredibly, the Indus Water Treaty is only egging on this race: under the agreement's provisions, the power project that is completed first will be recognised as 'legitimate' by World Bank experts, while the other one will be considered invalid or unviable.

While Pakistan claims that its installation will be completed by 2015, India has set January 2016 as its deadline. Although both countries are known for large infrastructure schemes that go hopelessly over deadline (and budget), the stakes are clearly very high, as whichever completes its project first will, in effect, get complete rights over the Jhelum/Neelum. Meanwhile, fears are thus rife that if issue of water-sharing between New Delhi and Pakistan heats up, Srinagar's cries for compensation will vanish in the din of the larger battle.

~ Peerzada Arshad Hamid is a freelance writer in Srinagar.

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