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April 2015 Economy and Policy

Published on: 2015-04-21 00:00:00     1390 times read    0  Comments
 
In connection to hydropower development, Nepalis believe that Indians placed higher importance on extending irrigation facilities rather than generating electricity. Subsequently, the collaboration resulted in the construction of the Tanakpur barrage.
 
--By Prof Dr Kamal Raj Dhungel
 
Indo-Nepal water resources relationship, according to available records, started in 1874 when Janga Bahadur Rana permitted the British India to build structures on the three Sagars—Jamuwar, Marthi and Siswa – along the Indo-Nepal border in the present day Kapilbastu district. This indicates that Indo-Nepal water resources relationship is over 130 years old. The Sarada Barrage in Mahakali River was constructed during the British- India in 1920 under the Sarada agreement. 
 
Koshi and Gandak
Since 1950s Nepal is dreaming to become a self-sustained nation in terms of hydropower by harnessing its immense water resources. With an objective to convert this dream into reality, Nepal and India signed two different agreements—Koshi and Gandak– between 1951 and 1960. These projects were materialized under bilateral cooperation but the implementation of these projects had become the root cause for gloomy environment for developing water resources that would deliver mutual benefits. Since then efforts have been made towards creating an environment for accommodating diverse views on exploiting water resources. 
 
Power tussle: mistrust created
In 1960, democracy was seized in Nepal banning political parties and setting the stage for the Panchayat era. The political tussle between pro-Panchayat and pro-democrats heightened with the pro-Panchayat accusing democrats of being anti national. They were accused of selling Koshi and Gandaki and claimed that both Koshi and Gandak projects were more of a curse than a boon to Nepal, with India benefitting disproportionately more. No doubt, India is benefitted more than Nepal but it is not just because of the Indians but because of the lack of homework in determining plans and packages that could benefit Nepal, on the part of Nepalis. This created doubt, mistrust and suspicion between both nations over the use of water resources. The Panchayat era made tremendous efforts to bring the situation in its fold but it failed to gain success, as it anticipated. In connection to hydropower development, Nepalis believe that Indians placed higher importance on extending irrigation facilities rather than generating electricity. Subsequently, the collaboration resulted in the construction of the Tanakpur barrage.
 
Debate over Indian Investment
There are two opposing views on the utilization of water resource through Indian investment. Distrusts, doubts, suspicions etc., are the bases of opposing Indian investment in hydropower development. People who are opposing it have no strong arguments except their narrow and biased thoughts that are influenced by anti Indian feelings. They think that India will cheat Nepal by feeding sweets and take all the benefits accruing from hydropower projects to be commenced. 
 
Another set of people, who are in favour of Indian investments, are blind supporters. They are trying to become India’s closest friend even at the cost of sacrificing national interest. It is believed that nobody can come to power in Nepal without ‘blessings’ from India and in a never-ending race to get into power, these set of people blindly support any Indian proposal on utilizing Nepal’s water resources, even if it harms national interest. 
 
Both these sets people are the real player to oppose and welcome Indian investment. The so-called anti-Indians also try to get closer to Indian power circles though means that are different from that of the second group. The pro-Indian Nepalis, who blindly support Indian investment in an unconditional manner, also carry the goal of getting involved into power politics in a different manner. These two extremists set of Nepalis with outright rejection and unconditional acceptance of Indian proposals create unfavourable investment environment for Indian investment in Nepal’s hydropower sector. 
 
Since neither of these ultra extreme thoughts works for the rational utilization of water resources, what is the alternative? Nepal should devote itself to create new ideas and suitable model to address the issues raised by all sets of people for exploiting Nepal’s hydropower potential through Indian investment. Confident diplomatic dealing is one of the important components that would be able to secure mutual benefit. But the success of diplomatic dealings would depend primarily on Nepal’s preparation to submit a proposal for developing hydropower projects through Indian investment.  If implemented through careful planning, such actions can help in foiling extreme views to some extent. Nepal has to undertake rigorous homework for preparing long-term plan for maximizing benefits from the proposed projects for both nations. It will help in paving way for Indian investment in Nepal’s hydropower development, and secure mutual benefits without much debate. 
 
Initiation on Chisapani Project
The Karnali Hydroelectric project was under discussion in the 1970s and was top priority until it was dropped in the late 1980s following a series of meetings between Nepal and India for its implementation. But clouds spread in the skies of both nations over its implementation. Nepalis refused to trust the impartiality of any negotiations on the distribution of benefits from the project due to experiences from the previous agreement. India was also against materializing this project. B G Verghese in his book ‘Water of Hope,’ views that  “There was a time when Nepal may have been willing to go ahead with Chisapani project in the 1970s. But there was a fear of being too dependent on Nepalis power in some Indian circles: with an installed capacity of 3,600 to 4,500 MW as estimated at that time, Chisapani would certainly have been a major contributor to the northern Indian grid by the early 1980s had it been taken up then. But, despite the lesson of Bhakra – power generation creates its own demand-and emerging energy shortage – nobody has the vision or the will to seize the opportunity.”
 
 
Indian aid 
Despite persistent odd situation between both nations for developing hydropower projects, Panchayat era, to some extent, was successful to win Indian cooperation for the construction of a number of hydropower projects. 
 
Commissioned in 1969, Pardi Hydropower Project, with a capacity of 1 MW, is the first hydropower project to be constructed through Indian cooperation in Nepal. It helps in powering Pokhara. With an aim to meet the growing power demand of Kathmandu valley, 21 MW Trisuli Hydropower Project was commissioned in 1971 and constructed at the cost of INR 140 million. Eight years later15 MW Gandak Hydropower Project, an extension program of Gandak Multipurpose Project, was commissioned. The last hydropower project, commissioned during the Panchayat system with Indian aid, is the 14.1 MW Devighat Hydropower Project constructed at the cost of INR 338.15 million in 1984. These projects have played significant role in powering the Nepali economy.  
 
Indian cooperation in these projects was not aimed at importing electricity from Nepal but to generate electricity to boost Nepal’s own economic activities. In addition to developing hydropower projects, there are electricity exchange programs in the bordering towns of both the countries. With demands mounting every year, and with meager increase in the electricity generation, Nepal is short of electricity supply. 
 
Nepal is importing electricity from India to fill the gap under three modalities that have varying purchase rates. First of these is based on Nepal’s entitlement under special river treaties. Under this modality, 10 MW from Kataiya and 12 MW from Tanakpur are available for import under the Koshi and Mahakali treaties, respectively. Secondly, 50 MW of power is available to import under the Power Exchange Agreement at a price of around 8.5 US cents per KWh. And as per third modality, Nepal can import a maximum of 100 MW of power through direct purchase from the Indian power market on market-governed prices. The price would often be more than the power exchange rates.
 
The author is Professor of Economics at the Tribhuvan University.

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