Ian Martin's realistic analysis of Nepal's challenges ('Let's not be naive about how difficult this process is going to be', #296) was in stark contrast to Steve Gorzula's polemical piece in the same issue on hydropower development in post-conflict Nepal ('Megawealth'). Hydro-energy is an input to production that should enhance forward and backward linkages of the national economy. That is how Norway, the United States and many other countries developed their hydropower power resources, not by export. Hydropower projects implemented in Nepal after 1996 have enhanced such linkages through local capital mobilisation, lowered generating costs and serving unmet internal demands. In an unfolding era of inclusive democracy, the country's unserved population must be the focus through such an approach rather than export.

SMEC's West Seti Hydropower project has pushed the export approach since 1994 but has been unable to sign a power purchase agreement with India. Without defining the selling price of electricity, to suggest that Nepal's revenue would be $20 million dollars is presumptuous. Furthermore, a killer clause contained in the 1997 agreement between Department of Electricity Development (DoED) and SMEC indicates that Nepal's expected revenue is completely uncertain. Clause 2.4 of the memorandum between SMEC and DoED, which allows the interpretation of the clause to rest with the company and not Nepal government, says, "Moneys payable from time to time by SMEC to debt participants or for operating costs in connection with the project will have priority in payment over money payable to HMGN under Clause 2.2 and following payments to debt participants and of operating costs in connection with the project if there are insufficient moneys to pay HMGN, the obligation to pay HMGN will be deferred until SMEC has sufficient funds to make payments.' In plain English, the terms of the clause means that Nepal may not receive any revenue.

West Seti's reservoir will inundate 20 km2 of fertile valley in four insurgency hit districts of Doti, Bajhang, Bajura and Dadeldhura. Should not the residents of the region be compensated for loss of agriculture land? Rehabilitating about 9,000 inhabitants directly displaced by the project is another major humanitarian challenge but social and economic costs are hidden when project benefits are publicly propagandized.

Fixing value on stored/regulated water, providing Nepal with 10 percent free dry season energy, adequate price for the generated electricity, rehabilitation of the involuntarily displaced families and ratification of the MoU by Nepal's parliament as per the Article 126 are real issues confronting the West Seti project. They have not been properly addressed since 1994.

Converting flowing water into a productive resource for economic development is much more than exporting the generated power to provide financial revenue to the government. Modern Nepal's challenges need innovative and practical solutions that cannot be provided by the antiquated paradigm of power export enunciated by Nepal's myopic elites since the early 1970s.

Shiva Bishangkhe,
Lalitpur