Chisapani Gorge, sitB oi the Karnali project WATER IN NEPAL

Falling water is Nepal´s wealth. As is the case with some other small, land-locked countries like Paraguay, Laos and Bhutan, its hydro-electric potential is Nepal´s greatest natural resource. Given Nepal´s long period of isolation until the 1950s, it is under¬standable that this obvious but unsur-veyed potential remained virtually untouched although a small hydel sta¬tion was developed at Pharpmg as far back as 1911. Other micro and medium-small projects have been un¬dertaken more recently. Yet, as Gyawali remarks, only four percent of Nepal´s population has access to electricity at present, much of this in and around Kathmandu-Hetauda-Bir-ganj. The average cost per kwh is 6 US cents, or NRsl.60.
According to Gyawali, development costs of hydro-electricity hi Nepal have been far higher than, say, in neighbour¬ing India ~ partly on account of the high cost of small hydro units. A weak data base ~ hydrological, geological and seismic — is a limitation that can and must be overcome. But the major thesis that Gyawali propounds in this thought-provoking book is that Nepal has been unable to exhibit the social and political will to develop despite the existence of a small, elite segment of modernisers. These modernisers are unable to guarantee that the substantial investments that hydro development requires will promote equity and general welfare. He contrasts the drive and work ethic of the occidental homo faber with the more contemplative, non-material and other-worldly out-look of the oriental homo mysticus, cocooned, as in Nepal, hi a still stag¬nant and feudal society. Any implica¬tion that development, especially large hydro development, will not take placeunless there is social and political change would be mistaken beyond a point as structural changes in society are both the product and the cause of development. Gyawali´s statement is not and should not therefore be read as a counsel of despair.

Gyawali´s other premise is that Nepal´s steady-state society is ruled by elites "with a severely restricted vision regarding the role of the weaker sec¬tions of society in development." They see progress as a zero-sum game as be¬tween the haves and have-nots. Hence the conclusion that "development ef-forts have largely failed in Nepal be¬cause they have concentrated too heavily on the hardware (such as hydropower plants and lift irrigation) and ignored or down-played the chan¬ges needed in social software." Problems of agrarian reform, credit and market access, are perhaps more important than civil engineering invest¬ments in irrigation if agricultural productivity is to be increased. The point is well taken and would be true of India and most traditional societies set on the path of development. In political terms, Gyawali sees the existing Nepali polity as having slowed down develop¬ment.
Economic stagnation has resulted from a divorce of power and responsibility, and the marginalisation of popular participation    hidevelopment. Another cause that Gyawalibelieves  has impeded    more autonomous decision-making has been the heavy dependence of the economy on ex¬ternal assistance. Hydro resource development has been slowed down by a fascination        with  mega projects like Karnali, requiring huge inflow of foreign capital and dependant on a monopoly buyer for the bulk of the electricity generated -India. He suggests that Nepal might have been better advised to go hi for small and medium run-of-the-river projects of 50-200 MW capacity which would have enabled it to negotiate sales to the Uttar Pradesh and Bihar electricity boards or to private entrepreneurs in India, with the ability to absorb this power internally if re¬quired. This is an interesting proposi¬tion but might not work in the manner intended as India´s foreign trade is centrally controlled and sanctions would still need to come from Delhi. Gyawali´s proposition would however have a chance were there to be a more relaxed Indo-Nepal political atmos¬phere.

It is perfectly understandable that Nepal should feel the need to venture cautiously into a U$5 billion investment such as Karnali might entail, or the easier yet very large Pancheshwar Indo-Nepal boundary project on the Mahakali. But the question Nepal must ask is whether or not it is foregoing a transforming opportunity at a time when its current growth strategy has reached a dead end. Projects like Kar¬nali would generate more than energy or provide irrigation and flood control. They would entail area-development, the development of considerable in-frastructures and manpower, provide a powerful engine for modernisation, and create the basis for the growth of a broader-based entrepreneurial and professional class in Nepal. The large employment potential, both direct and indirect, in construction services and watershed management in the upper catchment, would begin to reverse the north-south migration that is generat¬ing a variety of social and political pressures and would also set in motion an east to west migration that would make for a better demographic balance within the country. Whole new market opportunities would be evident. The very considerable revenues earned after servicing the investment costs could be ploughed into other regions and other sectors of development.

In other words, Karnali could be a trigger to transform social and political structures and lift Nepal´s economy and society to an altogether new threshold. The parallel with the oil-rich Gulf states would by no means be exact; but it may not be altogether ir¬relevant either.
 
This is not to suggest that the smaller and medium projects need wait. Arun III in east Nepal, with its 400 MW capacity can play the same role in Nepal as Chukha (336 MW) has played in Bhutan, which has followed a more creative path in water resources development despite a later start than Nepal. There is a lesson in this too.