It was going to be Nepal's biggest hydroelectric project, and had construction gone ahead the Arun III would now be nearing completion.
With a price tag of $1.082 billion, it would have cost more than the kingdom's annual budget and generated 202 megawatts from the mighty Arun River near this town in eastern Nepal.
Ten years after the project was abandoned, a rusted gate at a walled compound in Tumlingtar is the only forlorn reminder of this controversial scheme. Some here have still not forgiven Kathmandu-based activists who killed the project that they thought would have transformed eastern Nepal.
"We lost out, and so did the country," says Shyam Sundar Udas of the FNCCI's local chapter. "If Arun had gone ahead we would all have been prosperous."
Businessman Tileswor Shrestha in Tumlingtar shakes his head: "We woke up one day and found out it was just a dream."
Compared to other parts of the country, Sankhuwasabha district is relatively better off: there are phones that work. Food is plentiful. Several daily flights connect Tumlingtar to Kathmandu and Biratnagar, and electricity is regular. The hills below Dingla and Khandbari that were denuded two decades ago are now covered in thick community forests. Cardamom farms have injected cash into the local economy and new tea estates are coming up.
Whatever progress is seen here is because of local effort. Because after Arun III was abandoned, governments in Kathmandu abandoned Sankhuwasabha too.
The World Bank itself was badly burnt, it has kept off hydropower ever since and only recently hinted at taking a new look at potential projects. It was on 5 August 1995, after a year of mounting international protests that the World Bank's newly-appointed president James Wolfensohn announced he was pulling out of Arun. The Japanese and German governments were under firece pressure at home too.
Arun III was one of the first examples of internet-based international activism. The International Rivers Network, Friends of the Earth Japan and German green groups joined Nepali activists opposed to the project to successfully lobby against the Bank and bilateral donors. Unlike other hydropower projects, their objections to Arun III were not so much environmental or social, as economic.
Economit Bikash Pandey, who was a member of the Alliance for Energy group that questioned Arun III, recalls: "We weren't anti-Arun, all we were saying was time was not right, we should wait ten years." (See Interview). Arun III would have cost $5,000 per kilowatt when similar projects were being built for less than half the cost. The access road from Dharan to the dam site near Num cost Rs 50 million per km, when other roads in Nepal cost only Rs 6 million to build. Because the road would not be ready in time, the project even planned to fly equipment on heavy-lift Chinook helicopters from Biratnagar.
Arun III had its supporters, and they were not just in Sankhuwasabha. Former finance minister Ram Sharan Mahat says, "We lost in many ways, we will have to wait another ten years to develop a good project the size of Arun, and about $400 million in committed grants and loans had to be written off." Shankar Sharma, now with the National Planning Commission, agrees: "If the rate of return calculation made sense, it would have worked, and the road itself would have benefited the people through the multiplier effect."
But Arjun Karki, who now heads Rural Reconstruction Nepal and a Tumlingtar native opposed the project even though it made him a lot of enemies here. "My argument was how could one of the poorest countries in the world afford to produce electricity more expensively than the United States?" recalls Karki. After Arun was dumped, for half the cost and in half the time, smaller public and private projects produced the same amount of electricity Arun III would have, he says.
In the decade since, the road from Hile is still crawling up the Arun Valley and has only reached Leguwa. Fed up with waiting, people here dug their own road, air-lifted jeeps, and now carry diesel in dokos up from Hile so locals can commute. Says Khandbari's ex-mayor Kiran Shakya: "We realised no one would come to help us, we would have to do it ourselves."
s eastwards winding its way around Makalu to slice through the Himalaya and meet the Sun Kosi near Dharan. The river's gorge offers the perfect route for a north-south highway joining India and China (see box) and would make a revival of Arun III finally feasible. At a public meeting in Khandbari on 20 November to push the highway, locals were wary about having their hopes dashed once more.
"We have been let down so often, we take it with a pinch of salt," says FNCCI's Udas, "but the Kosi Highway would not just benefit us, it would benefit the whole country as well as India and China."
Hari Bairagi Dahal, Sankhuwasabha's ex-MP from the UML, admits Arun III was a loss, but he has no time to be upset. Even as MP he was busy staging sit-ins at Singha Darbar to force the government to complete the Khandbari road. After parliament was dissolved, he started small hydropower projects he jokingly called "baby Aruns" with local financing and expertise. Dahal has now set up a trust to lease a power plant in Khandbari damaged by the Maoists, sell electricity to the grid and plough the profit to run three colleges here. (See: 'An alternative current', #204 and 'People power', #166) Says Dahal: "We can't say how sad the Bank pulled out, or there is a war going on, and fold our hands. For our own self-respect we have to work to improve our living standards and the Kosi highway is one way of doing that."
For decades, Nepal played off neighbours China and India for aid. Now, Kathmandu seems to have realised that it can benefit from their friendship for trade.
A highway linking India to China via eastern Nepal's Arun river valley would be the fastest all-weather trade route between Calcutta and Haldia ports in India to southeastern China. Current options through the 4,000 m Nathu La in Sikkim is difficult and snowbound four months in a year.
But if the 310 km Jogbani-Kimathang highway through Nepal is opened, it would be a shortcut. Furthermore, half the road already exists and only a 140 km stretch, most of it from Num to Kimathang on the Tibet border, needs to be built. Nepal is urging China to help build it. During an inspection visit to Khandbari last week, Chinese ambassador Sun Heping said: "China is in favour of opening more border links with Nepal and will look favourably into the proposal." However, analysts say China may be interested in first finishing the Rasuwa-Dhading link and Kathmandu's Outer Ring Road.
India requested Nepal to facilitate a transit highway to China at a bilateral meeting earlier this year. Nepal subsequently offered three options: Bhairawa-Mustang, Birganj-Rasuwa and Jogbani-Kimathang. Of the three, the last is the most direct route.
Khandbari can-do locals have been let down before and have already started a symbolic 'One Rupee Each' campaign to raise funds for the highway. "Even if no one cares, we want to show we care," says local youth Dipan Kumar Shrestha, who spearheads the drive (see pic).