Nepali Times Asian Paints
Powerless even after polls


Among the three big parties, only the NC has an election manifesto in which hydropower is regarded with pragmatism and not nationalism. This is logical since the NC's Gyanendra Bahadur Karki has been Water Resources Minister since April 2006, and has survived efforts by other parties to seize this lucrative ministry. It is under Karki that two major hydropower projects have been approved, and another is pending- all in the past six months and all to Indian private sector firms.

This has raised eyebrows, and opponents of the projects have taken their case to the Supreme Court arguing they should have been approved by the parliament. Even if the three export projects that cumulatively total 1,500MW go through smoothly, the big question is whether they will solve the country's domestic power shortage. It's not likely.

MoWR officials say it's a win-win for Nepal as projects like Upper Karnali, Arun III, Budi Gandaki and West Seti will be built and operated by foreign companies before they are ultimately handed back to Nepal. Until then Nepal will get free power, royalties and export tax.

"Nepal will earn millions of rupees from these projects, Nepalis will get jobs and we will also end up owning the hydropower plants," Minister Karki told Nepali Times. "The journey to making Nepal prosper from hydropower exports has begun."

But how? The journey is already looking rocky and long. And it looks like Nepal may be earning money exporting power to India, but continues to suffer six hours of daily power cuts at home.

Large projects in Nepal are fraught with delays. Upper Karnali and Arun III will take at least two more years for construction to begin. After that it will be another five years if everything goes according to plan. In that period Nepal will probably be a federal republic, and the autonomous regions will want their share of revenue from plants built on rivers in their territory.

Even the relatively small 70MW Middle Marsyangdi has been delayed by more than three years because of local disputes and its cost has doubled to Rs 26 billion.

The recently signed MoUs for Upper Karnali and Arun III has a clause that says 'Neither party shall be liable for default if there is war, riots, civil disobedience, terrorism or any other cause beyond the reasonable control of either party.' This is leaving a lot to chance.

The Australian joint-venture West Seti has been delayed by 12 years as it negotiated with Indian power purchasers, lined up finances and insurance. "This time we have made sure delays like the West Seti will not be repeated," explains Anup Upadhyay, MoWR joint secretary. "Developers will henceforth have to ensure financial closure within two and a half years after they obtain the survey license."

The MoUs with the Indian investors of Arun III and Upper Karnali prohibit upstream and downstream projects. But the Maoists in their manifesto say high dams will be built on the Kosi, Gandaki and Karnali basins and their water will be taken by tunnels to irrigate the Tarai. Depending on how well the Maoists do in the elections, they could demand a renegotiation of the MoUs with the Indians.

In its manifesto, the NC also plans to produce 5,000MW in the next 10 years from the three river systems, but all its planned projects are export-oriented. So who will be producing for the domestic market?

The MoU between the MoWR and the Indian-Italian-Thai consortium (GMR-ITD) entitles Nepal to 12 percent free power from the 300MW Upper Karnali. From the 402MW Arun III project signed with an Indian company (Satluj Jal Vidyut Nigam Limited) almost 22 percent of free power will be plugged into the Nepali grid.

Hydropower experts argue that free electricity will not help Nepal meet its increasing domestic demand. They say projects like Arun and Upper Karnali should have been built for the Nepali market. Nepal's demand of 700MW is increasing at 10 percent a year but supply has remained stagnant at about 600MW.

"The real peak demand is already 1,000MW and that means we need a substantial increase in supply," says energy expert Ratna Sansar Shrestha. "How are we going to meet our own power needs?"

(11 JAN 2013 - 17 JAN 2013)