The May/June 1991 issue of Himal on ‘Troubled Waters’ carried a detailed review of Nepal’s struggle with its hydropower resource. During the past year, democracy has brought about a sea change in Nepal’s water resources sector and a painful period of adjustment for all involved. What follows is an update.
ARUN III REVIEW
“Vanity projects” such as the Arun III have come under scrutiny at last. In September 1991, the then Minister for Water Resources Basudev Risal appointed a task force to look into the selection criteria for large hydro-electric projects. The team took the World Bank-funded and Electricite´ de France-conducted Least Cost Generation Expansion Plan (which justified Arun III as the best option for Nepal) and ran the computer programme without some of the more outrageous assumptions made in the LCGEP. The task force found out that Arun III actually stood eighth, far behind alternatives such as West Seti, Sapta Gandaki, Upper Karnali and Kali Gandaki, It also advised against including the Arun III tunnel, powerhouse, and the 200 km access road into one tender package, as this would limit the bidding to a handful of large contractors.
An intrinsic part of the Arun III plan had been to force Nepal into a “no option” trap and install oil-fed thermal plants to produce about 200 MW of electricity — primarily, it is said, because there is a large unsold inventory of thermal generators in the West. The Government of Nepal has now rejected that suggestion. With 40 per cent of the country´s foreign exchange earnings already being spent on the import of petroleum products, and the fuel blockade imposed by India in 1989 still fresh in memory, taking such an option would have been political suicide.
The Government now plans to build a smaller 100 MW project, known as the Kali Gandaki-A. Meanwhile, the ruling Nepali Congress in its mid-February party convention in Jhapa resolved that medium-scale hydro-electric projects should be built in all the regions of the country, a sharp contrast to the past regime´s emphasis on individual large projects.
The open debate about the pros and cons of large-scale hydro development has shaken the foundations of conventional thinking. Nothing is as it used to be. Kathmandu journalists were shocked in February to meet with Biharis who had come not to support, but to oppose big dams (see Briefs). In Nepal, too, there is serious rethinking about the economic and financial risks of building mega-projects that singly cost several times the country´s GNP.
In the upbeat aftermath of Prime Minister Girija Prasad Koirala´s December visit to New Delhi, which resulted in the signing of a trade and transit treaty as well as an “understanding” on the study of mega-projects in Nepal, one could hardly have predicted that subsequent water talks would be practically deadlocked over conflicting priorities. According to reports, recent talks on the “Kosi high dam” ended in an impasse because Kathmandu wanted to study navigation and access to the sea, but India would have none of it. Similarly, the 10,800 MW Karnali also hangs in limbo. Apparently, India will not allow scientific assessment of the flood and irrigation benefits on its side, and Nepalis feel that fixing technical parameters without such an assessment would be tantamount to a giveaway. Another mega-project, Pancheswar on the Mahakali River, might be stalled on the negotiating table because of India´s inability to appreciate Nepali sensitivities and to assume a “positive sum” mentality overall, rather than a “zero sum” one on the downstream Tanakpur.
Koirala´s goodwill visit and the understanding reached at the political level with India´s Narasimha Rao, wherein Nepal was to allow India to complete the Tanakpur barrage in return for a larger head regulator for future irrigation works and 10 million units (kWh) of electricity, generated a cyclone in the Parliament and press.
Actually, Tanakpur might have set in motion a healthy tradition of “public hearings” on major projects. When the Government hesitated in placing before Parliament the documents related to the agreements with India (mainly, it seems, because they were not formal agreements but signed minutes of meetings generally not disclosed in normal diplomatic practice), the Opposition staged an en masse walkout, followed by a blockade of the Lower House rostrum and seven hours of continuous sloganeering a few days later.
The Prime Minister, in the final analysis, was a victim of acts and omissions of les s-than-competent Nepali feudocrats, ill-attuned to the changed aspirations. As a result, important homework and diplomatic consultations were not conducted before Koirala´s visit. And so in New Delhi, the Nepali side was left in an embarrassing position of having to thank India for receiving 10 million kWh from the Tanakpur power plant when that was the minimum energy content of the water in the section of the Mahakali apportioned to Nepal under an agreement the British made with Chandra Shumshere in the 1920´s.
It now seems that a portion of the Nepali territory has been submerged to provide pond age for the Tanakpur power plant, thus enhancing its energy-generating capability. If this is true, then New Delhi´s claim that the project is wholly within Indian territory would be incorrect. A bit of Nepali natural resource would have been shared with another country, and whether Nepal received equitable compensation would be open to question. The matter would then fall under clause 126(2) of the Nepali Constitution, requiring ratification by a two-third parliamentary majority, or a simple majority if it is not deemed to be a “broad, grave or long-term” issue.
All this, however, is still a matter of conjecture. The job of finding the truth has been entrusted to a special committee of the Parliament consisting of political heavyweights from every party big and small. The Committee´s mandate is to unearth the truth and place its findings before the House.
Few doubt that both the Nepali and the Indian leadership acted in good faith based on the knowledge they had; however, can the same be said about the bureaucrats of both sides? If honest technical appraisals had been done, the two countries could perhaps have come up with a better project at Tanakpur which would have allowed more mutual benefits to accrue.
Such a better-planned and more equitable project would have provided a built-in incentive for Nepal to expedite the building of the larger Pancheswar storage plant upstream because it too would then derive benefits from upstream regulation of water. Tanakpur, as it stands, is not attractive to Nepal; but India needs Pancheswor to exploit the full capacity it has developed at Tanakpur.
India would thus have gained in the long term by promoting a “better partnership at Tanakpur. Also, in this first agreement with a newly democratic Nepal, a positive gesture from India, especially an openness on technical matters, would have contributed greatly towards removing from the Nepali psyche the all-pervasive fear that they are going to be cheated by New Delhi.
The end result of the storm over Tanakpur is that many Nepalis who had felt that the two-thirds majority provision in the Constitution was impractical and needed amendment, have now changed their views. They have come to regard that provision as a safeguard of Nepali interests.