ARE DONOR BANKS TO BE BLAMED?
( Kathmandu Valley Water Supply Issue)
AB Thapa
We frequently hear controversies over the projects financed by donor banks. Very often it is alleged that the donor banks impose their own terms and conditions which are not in the interest of our country. Is it always true? Should the donor banks be blamed? The most recent controversy is about the financing of the Melamchi Water Supply Project. Asian Development Bank has agreed to provide loan assistance to implement the Melamchi Water Supply Project. The Asian Development Bank is reported to have required that the management of the Kathmandu Water Supply Project be handed over to a foreign company as a precondition for providing the loan assistance. Such transfer of management is to take place based on the agreement already signed between our government and the Asian Development Bank.
Demand Management
It need not be explained that Kathmandu valley at present is suffering from water shortage. There is a great urgency to resolve this problem. It is quite clear that the present water shortage problem would hardly be resolved without augmenting the supply. It has been estimated that onward 2010 the supply to Kathmandu valley would have to be further increased even after the diversion of the Melamchi flow into the Kathmandu valley.
At present some of us have a very false notion that the Kathmandu valley water supply problem would be temporarily solved by improving the management system. Thus we are justifying the policy to hand over the management of the Kathmandu valley water supply to a foreign private company despite the fact that we would have to pay an exorbitant amount of money to that company. The water supply charge to be paid by Kathmandu residents would be greatly increased. It will force a vast number of financially weak Kathmandu residents to cut down their daily consumption of water. In this way it will certainly help privileged people to be provided any additional quantity according to their requirement at the expense of the poor.
Other Options
Demand management is the only recourse in those desert regions where there is not any possibility to augment water supply. How about Kathmandu valley? We have abundant water. We need not cut down the supply to Kathmandu residents to resolve this problem. An enormously large additional quantity of water could be provided to Kathmandu residents almost for free if we linked water supply program with electricity generation. Diversion of regulated Langtang river flow via proposed Melamchi tunnel would provide such opportunity. The super high-head Langtang hydropower stations would be able to produce electricity at an extremely low cost. Unfortunately, we are at present following a very irrational method to resolve Kathmandu water supply problem. There is a need to hold widespread consultations to find best solution to resolve Kathmandu valley’s long term water supply problem.
Renegotiation With the Bank
We are told that the Asian Development Bank is very rigid to enforce the terms of the agreement. One is compelled to wonder why we signed such a controversial agreement if we are not convinced that the agreement is in the interest of our people. We can not prove our innocence in accepting the condition to transfer the management of the Kathmandu water supply to a foreign private company by laying the entire blame on the Asian Development Bank. Can not we renegotiate a more favorable term if in our opinion some of the loan conditions are detrimental to the interest of our people. Or we are simply trying to free ourselves from the responsibility to manage ourselves the water supply problems by handing over to a foreign company despite the fact that the residents of the Kathmandu valley would be forced to pay a high price for it. It is equally difficult to understand why the hydropower component of the Melamchi tunnel was dropped despite the strong recommendation of the UNDP report to include it since it would have helped to reduce water supply tariff.
Hydropower Component of the Melamchi Project
There exists a big potential to generate cheap electricity by using the diverted flow of the Melamchi river The elevation of the Melamchi intake weir is 1715 m and the inlet to the treatment works near Sundarijal is 1409 m. Thus there is an enormously big gross head of 306 m. The UNDP report has clearly stated that the net increment in investment ( the cost of the powerhouse located near Sundarijal with electromechanical equipment) needed to implement the hydropower element is relatively small as the intake headrace tunnel and penstock are already in place for conveying water to the treatment works. The UNDP study has concluded that it would be worth constructing the hydropower and it could make a contribution to reducing the cost of drinking water to Kathmandu. According to the UNDP report even before the diversion of the Yangri and Larke rivers the total annual generation of the Melamchi hydropower would be 60 GWh and out of it the firm power generation would be 40.5 GWh. The Melamchi hydropower electricity generation would have been close to 50% of the annual generation of the Kulekhani No.1 hydropower. After the diversion of the Yangri and Larke the electricity generation of the Melamchi hydropower would be further increased. It surprises anyone to learn that the Melamchi hydropower component has been dropped. People want to know why our Planning Commission allowed the power component of the Melamchi project to be dropped despite the fact that the UNDP report has concluded that the power station would be worth constructing and could make a contribution to reducing the cost of drinking water to Kathmandu residents.
Amendment of the Kankai Project Agreement
In the past the Asian Development bank had been very flexible. They fully cooperated to make substantial amendment to the agreement whenever they were convinced that our government has raised concern over genuinely important matters. Kankai Irrigation Project could be a typical example.
Government’s attention was drawn as early as the 1960s to exploit the potential of the Kankai River. Department of Electricity was the first to conduct preliminary study of this river for power generation. The Asian Development Bank’s growing interest in providing financial assistance to Nepal gave fresh impetus to develop the potential of the Kankai River. The Bank agreed that they would be prepared to finance for the time being a small proportion of the irrigation component of the Kankai development project. Following the Asian Development Bank’s advise our government requested the Bank for technical assistance to conduct the detailed study of the Kankai Irrigation Project. The Bank approved the request and the studies of the Project commenced in January 1971. The feasibility study was completed in September 1971. Feasibility study as well as detailed design of the Kankai Project was done under a grant directly by the Asian Development Bank outside Nepal . We from the Nepalese side expressed our reservation about the detailed design. After completing various formalities the Bank decided to finance the Kankai Irrigation Project. The construction of this project commenced from around the middle of 1970s.
We proposed the Asian Development Bank to amend the loan agreement by substantially modifying the total design of the project even though the contractors had already started the construction works at site. The modification allowed the capacity of various structures ( involving about 2/3 cost of the project) to be increased by about 60% absolutely without rise in project cost. The Asian Development Bank agreed to amend the Agreement. An additional Supplementary Loan Agreement was signed to incorporate those modifications.
(Dr. Thapa writes on water resources)
