Bad Business in Bajhang

Micro-hydro-power technology, when unthinkingly grafted to remote areas, can destroy the spirit and the savings of entrepreneurs.

There is a warning being whispered these days in the village of Byasi in Nepal's far western district of Bajhang: "Don't give your daughters in marriage to Mr. Joshi's sons."

The reason is that many people believe Dhana Raj Joshi is headed for bankruptcy. But how could it be? Joshi comes from a well-to-do priestly clan which served the rajas of Bajhang. Besides officiating as a well-regarded pundit, he is also a school teacher and has income from his land and a shop that sells calico. What changed his fortune? "Oh, the micro-hydro business," say the villagers of Byasi.

This may come as a surprise to many who have heard of the successful spread of micro-hydro projects elsewhere in Nepal under the sponsorship of the Agricultural Development Bank (ADB/N). But such projects seem doomed to failure in Bajhang.

Joshi's problems illustrate what can happen when state-backed institutions, such as ADB/N, take over the task of introducing modern technology to remote areas. Technology which works in the more developed central regions of the country, when unthinkingly grafted to remote areas lacking the proper economic environment, can devastate the spirit of entrepreneurs and is unfair to the population at large.

While today, ADB/N has the means to introduce modem micro-hydro technology to all – or nearly all – districts of Nepal, whether such introduction will succeed is a different question, especially in areas with difficult access. The experience of Joshi, and others like him in Bajhang, shows that rural entrepreneurs must wisen up to the forces at play or get enmeshed in a losing battle against complex institutions and processes.

PROMISES, PROMISES

It is natural for entrepreneurial-minded villagers to be drawn into the exciting new venture of generating electricity .from local streams and rivulets. Like many others, Joshi had reasons to be optimistic back in 1987, when the ADB/N branch manager of Chainpur, Bajhang' seat, came knocking. Ambitious Bajhangis had already installed two turbines elsewhere in the district. The manager was keen to distribute loans and promised all kinds of assistance. "All of a sudden, the bank manager and the Sarkar were at our door with funds and service," recalls Joshi. With the government so keen to help, what could go wrong?

Equally reassuring were the technicians who came to do the feasibility study. They said a grain and oil mill would have to be set up first; once the turbine was tested, the bank would step in with an additional loan for electrification, The unit would initially produce 10 kW of electricity and electrify households within a radius of 3 km without need for a transformer, they assured him.

Joshi's loan came through without any "push" and the turbine too arrived on schedule. The transportation cost, however, far exceeded his calculations. The freight charges from Kathmandu to Dadeldura was NRs 10,000, as estimated, but the porter fees for hauling the turbine up to Bajhang came to a hefty NRs 50,000. Joshi's troubles had begun.

Technicians reached Byasi soon after the turbine arrived. However, they realised that some essential parts were lacking and they flew back to Kathmandu. They came a second time and set up the turbine, but after they had left, it was discovered that the turbine could not operate at the designated speed and hence could not be commissioned.

Joshi wrote numerous letters and sought the help of some friends in Kathmandu, but it was only a year later that a technician was sent by the manufacturer, who found fault with the original feasibility study. The company now agreed to send a new turbine, if Joshi promised to pick up the freight charges. Several acrimonious letters later, the new turbine arrived and was installed. It ran smoothly, but could produce only 7 kW. Its reach without a transformer was now a dismal radius of less than one kilometre, and the nearest consumer household was more than a kilometre away. Since a transformer would be expensive, Joshi turned to his supportive banker. To his surprise, the ADB/N representative said an additional loan was out of the question.

HELPLESS ENTREPRENEUR

Joshi's grain mill can process 300 kg of grains per hour but he has few customers. His earnings last year was NRs 12,000, after deducting maintenance costs. The annual payable interest on his loan is NRs 22,000. Labour costs are extra.

Unable to invest any more in his electrification venture, Joshi is now thinking of installing a saw-mill to utilise the generation capacity gone waste. Asked if he was not making another mistake, Joshi replies, "I have already spent more than a lakh, so what's another ten thousand rupees?"

Problems and bottlenecks similar to Joshi's have beset the other eight Bajhangi entrepreneurs who invested in micro-hydro. To begin with, most had no managerial skills and were ill-prepared for the task of electricity-generation. They miscalculated the cost of haulage and overestimated the quantity of food-grains that would be brought for processing. Some did not even consider the seasonal fluctuations of water flow, which left their intake pipes dry for months on end.

Sometimes, the very novelty of the technology rendered the power entrepreneurs helpless. All they could do when the turbine did not work was to sit and stare at it and say, "Something has happened to the turbine." The manufacturer's stipulations kept the entrepreneurs dependent on faraway technicians and prevented them from learning about the system's workings.

On the whole, the entrepreneurs received poor advice, both from the ADB/N and manufacturer representatives. These would-be advisors failed to consider how modern technology, hauled up with great difficulty to Bajhang would fit conditions far different from the mainstream of Nepali development. Bajhang lacked not only easy access, but had a low level of technical knowhow. When the bank insisted that the micro-hydro units also have milling capability, it failed to consider that Bajhang does not have increasing rates of agricultural production which make such add-ons attractive elsewhere in Nepal. In Bajhang, the comparatively low demand for milling is being adequately met by the Traditional ghattas.

Unfortunately, the support promised to Joshi and the others did not extend beyond the initial stage. The officials' only interest was to fulfill their target, and that was done with the setting up of the turbines. Now, when Joshi and the others desperately need help, the institutions of the state are drifting away.

AN EXCEPTION

Rajendra Khatri of Chainpur is the one exception among the eight power entrepreneurs of Bajhang. He has sufficient money, some technical skills, and good contacts with Kathmandu high-ups. When problems arise, he is able to mobilise his support system and overcome hurdles that would have left the others helpless.

Because Khatri's turbine was affected by seasonal fluctuation of water and sand damage, one day it stopped turning. Whereas Joshi might have waited for a technician to come from Kathmandu, Khatri went ahead and had the turbine opened. He found that a part was broken and took it to the local goldsmith. The turbine was repaired within a short time and at little cost. Khatri succeeded essentially because he broke the manufacturer's rules, which Joshi and others would not dare do.

Due to his Kathmandu contacts, Khatri was also able to obtain a transport exemption from the Cottage Industry Office, which saved him the costs of hauling in his machinery. Joshi and the others, overwhelmed as they were by modem technology, had not even been aware that such a facility was available.

Quite unprepared when they ventured into the micro-hydro business, Joshi and the others became completely dependent upon state institutions. Khatri, meanwhile, is likely to overcome Most difficulties despite Bajhang's infrastructural and economic conditions. He is still financially independent which makes him more self-confident and self-reliant and his ability to mobilise officials and institutions is, in fact, a powerful economic resource.

TERRA INCOGNITA

For micro-hydro units, Bajhang was terra incognita. For the people of Bajhang, the units held out the promise of ushering in "development". The state, with its supra-local, hierarchical organisation and comparatively abundant funds at its disposal can plan, design, implement, and organise – even when basic infrastructure such as roads are lacking. But such lack is a formidable threat to enterprises that require outside assistance.

What makes the experience in Bajhang paradoxical is the fact that planning for decentralised energy supply and a higher degree of sustainability has in reality made entrepreneurs more vulnerable and dependent on central action.

A "take-off" of a specific kind is required. What is abstractly called "local capital formation" is in practice reflected in the emergence of local entrepreneurs who, besides possessing personal abilities, managerial skills, commitment and some technical knowledge, have sufficient capital of their own, participate in local and national social networks and are, above all, experienced in dealings with state institutions.

In Bajhang the micro-hydro-power station owners ventured into the state-promoted programme expecting full assistance. They thought so especially because the programme had come looking for them arid not vice versa. In fact, it might even be said that the programme was, in a way, imposed on them. Yet today, half of Bajhang's power entrepreneurs are in danger of losing the land they kept as collateral for their loans. But even now, they continue to rely on the Bank to take a sympathetic attitude. They are hopeful that the ADB/N will not insist on repayment of the credit.

Pfaff-Czarnecka, a social anthropologist teaching at the University of Zurich, spent four months in Bajhang last fall.