NATIONAL10 [FACE TO FACE (Spotlight Weelky)]

Landlocked and Hydropower Rich Paraguay, Bhutan and Nepal: Cases of Lamed Duck, Flying Geese and Sitting Duck

By S.B. Pun

Much has been written and talked about how nature has endowed us with a rich 83,000 Megawatt (MW) of hydroelectric potential. We, therefore, never tire of talking perpetually about our ìKhera Gairakheko Paniî and produce plans to take the huge quantum leap by exporting over 20,000 MW of power in the coming years. We got to be pragmatic, we got to look around keenly and we got to learn from the experiences of other landlocked and hydropower rich countries like Paraguay and Bhutan, one already a lamed duck and the other heading to be a flying geese.

Paraguayan Geopolitics

Like Nepal, Paraguay is a small landlocked but hydropower rich Latin American country sandwiched between two large countries, the Portuguese speaking Brazil to the north and the Spanish speaking Argentina to the south. Historically, Paraguay had been economically and politically very much dependent on its southern neighbour, Argentina. Its only outlet to the sea was along the Parana river through Argentina and to an Argentinean port. But there was a keen historical rivalry between Argentina and Brazil to exert their spheres of influence on Paraguay. In 1966 Paraguay signed the treaty of Iguacu with Brazil regarding the development of the border river, Parana. The treaty basically recognized the common ownership of the water resources potential with an equal sharing of the electric power. Then in 1973, Paraguay and Brazil signed the Itaipu treaty for the construction of the worldís largest 12,600 MW hydropower plant on the border river Parana. In order to woo Paraguay, Brazil went a step further by building a bridge over the Parana river to provide an alternate route to a sea port in Brazil. Paraguay was thus freed from Argentinaís monopoly hold for access to the sea. Not to be outdone, Argentina under its President Peronís personal instruction ìto sign now and renegotiate laterî signed the 2,700 MW Yacyreta treaty with Paraguay also in 1973.

Itaipu Controversies

There were a host of controversies on the 12,600 MW of power and 72,000 million Units of energy Itaipu project between the two countries: the height of the dam, disproportionate extent of flooding between the countries, low compensation amount fixed, the frequency of generators for each countries and even the structure of the Itaipu Binacional Administration. But the main debate internally within Paraguay was on what to do with this huge 6,300 MW of its portion of the power at a time when its own installed capacity was only 235 MW. One school of thought lobbied for maximizing domestic use through industrialization and installing energy intensive industries. The other school, on the other hand, lobbied for maximizing export. The export proponent won because Paraguay had poor infrastructure, no domestic raw materials and above all no financial resources which, once the export revenue starts accruing was planned to be ploughed back for industrialization and infrastructure building. The initial project cost estimate of 2 billion US$ in 1973 snowballed to 18 billion US$ when completed in 1985.

Lamed Duck

But Brazil, as the monopoly buyer, gave Paraguay a paltry price of only 300 US$ per million Units which despite the increases of 3.5 times after commissioning in 1986 and again 4 times in 1992 still became only 4,200 US$ per Million Units i.e. a mere 0.42 US Cents per unit! Paraguay thus gets only 118 Million US$ per year from Brazil despite exporting a huge 28,000 Million Units from Itaipu. Incidentally, this energy is more than our Karnali Chisapani's 21,000 Million Units and our portion of 5,000 Million Units from Pancheshwar put together. Paraguay, despite its earlier clever political maneuvering, now feels that it has been cheated and got a raw deal from Brazil. The lesson to draw for us, Nepalese, is that megawatt rich does not necessarily mean that we will be dollar rich as well. We must have an in-house capability to negotiate and convert megawatts into fistfuls of dollars. The tiny 5 million Paraguayans have a per capita GNP of 2,010 US$, whereas, the huge 164 million Brazilians have a per capita GNP of 4,700 US$. Paraguay is thus a classic example of the lamed duck!

Bhutan

It is not the purpose of this article to rake up the Bhutanese refugee issue. But one must note the World Resources 1998/99 (a publication of UNDP, UNEP, WRI and World Bank) wherein the population of Bhutan is given as 734,000 for 1950 and for 1998 as 1.9 million. The World Development Report on the other hand has the 1998/99 population of Bhutan as 736,000 indicating an increase of only 2,000 in 49 years i.e. a clear case of ethnic cleansing! By contrast, Nepal's 1950 population was 7.9 million and in 1998 this has tripled to 23 million. It is hoped that our Shital Niwas ìGurusî take due note of this internationally published figure and refrain from quoting the downsized ì6†lacksî figure as desired by Bhutan. Bhutan's per capita GNP of 400 US$ must be seen in the context of this downsized population. Barring the population issue, Bhutan has however done well on other social and infrastructure sectors like literacy, roads, electricity consumption and even on access to electricity with over 20% of the population having access.

Geopolitics

In 1949, Bhutan signed a Treaty with India wherein Bhutan's foreign and defense policies were to be "guided" by India. The Sino-Indian border clash of 1962 forced India to build for its own security a number of north-south and an east-west road networks within Bhutan. These roads covered the difficult interior terrain and are now perceived as a blessing in disguise. Not only have these roads provided accessibility to the difficult interior terrain for Bhutanís socioeconomic activities but they opened up the better hydropower sites as well. The annexation of Sikkim by India in 1978 was definitely a wake up call to all the small neighbouring countries. In Sikkimís case sovereignty was waylaid by the principle of the imposition of the will of the majority of the population. This forced Bhutan to enact in the 1980s a new law on citizenship to control population growth through immigration. As long as the status quo on foreign and defense activities were maintained, India kept aloof from the Bhutanese ethnic cleansing drive.

Flying Geese

With 60% grant and 40% loan at 5% interest from India, the 336 MW Chukha hydro project was commissioned in 1986. India buys about 90% of this power at about 1.6 US cents per KWh presently thus providing Bhutan about 22 M US$ or 90 crores IC annually for its developmental activities. The 10% of Chukha power, which is used internally, is directed very intelligently to power the industries that use indigenously available raw materials like the two cement, one calcium carbide and the forestry product industries. These power-consuming industries helped to generate considerable off-farm employment opportunities.

Bhutan has ambitiously embarked on the construction of the large 1020 MW Tala and the smaller 45 MW Kurichhu hydropower projects with Indian assistance. This is probably under the same Chukha financing model also. Even Austria is financing the 60.8 MW Basachhu hydropower project in Bhutan. When these projects get completed in 2004, Bhutan can boast of an installed capacity of 1470 MW. This is truly the case of the flying geese!

Nepalese Geopolitics

The 1950 Treaty of Peace and Friendship with India, the Tribhuvan Rajpath linking Kathmandu to the plains, the 1954 Kosi and the 1959 Gandak Agreements all came in quick successions. The furore over these agreements in Nepal and the subsequent 1964 Gandak Amendment and the 1966 Kosi Agreement Revision came only after the short Sino/Indian border clash of 1962. Our two big neighbours vied for their spheres of influence in our infrastructure building: 21 MW Trishuli and the 1 MW Phewa versus the 10 MW Sunkoshi and the 1.5 MW Seti; Tribhuvan Rajpath replied by the Arniko Rajmarga, Siddhartha Rajmarga into Pokhra replied with the Prithwi Rajmarga. The east-west Mahendra Rajmarga has finally been operational with the major portion built by India to cater to its own security concerns. This was clearly manifested when the Nepalese government awarded the Asian Development Bank financed Kohalpur/Banbasa road project to the Chinese contractor and India torpedoed it. Unfortunately the greater part of the Dhankuta/Kathmandu/ Pokhara/Surkhet hill road remained merely on the drawing board. This road would have contributed greatly both for the socio-economic as well as better hydropower development activities in the interior. With the arrival of the multilateral and the bilateral institutions in the 1970s, the rivalry between our two big neighbours diminished. In fact, India on water resources development retracted to its own territory by building the Girijapur barrage on the Karnali in the late 1970s and the Tanakpur barrage on Mahakali in the mid 1980s. At the same time India opened up its other avenues: Chukkha in Bhutan and the 1977 five-year agreement on Farakka with Bangladesh.

Nepal's Kosi, Gandak and the Karnali contribute an overwhelming 71% of the lean season flow of the Ganges. The Ganges supports nearly 400 million of the population of UP, Bihar, West Bengal, Nepal and Bangladesh. Despite the 1996 Farakka agreement, the critical issue for both India and Bangladesh is the lean season augmentation of the Ganges. The augmentation by the Pancheshwar storage project under the Mahakali Treaty has unfortunately been summarily waived off by the words ìprecludes the claim in any formÖî. Nepal's geography is imminently suitable for large-scale storage projects to augment this flow. With the lessons learnt from the three previous Treaties, we particularly the political masters, must take due recognition of this fact and decide how we play our card.

Sitting Duck

Because of the above geopolitical background, the chemistry between Nepal's huge hydropower potential and India's hungry power market has not catalyzed as yet. That is why we have an installed capacity of 319 MW against Bhutan's 348 MW, and whereas our 2004 capacity will be 609 MW, Bhutan will be having a stupendous 1470 MW. Hopefully, the Pancheshwar DPR will be concluded within two years and the cost to be borne by the two countries finalized in proportion to the ìaccrued benefitsî. We will have to bear this cost from the quantum of energy to be exported at a ìmutually agreed priceî which is tricky indeed due to the monopolistic buyer. Should we continue on with this laissez-faire? Shouldn't we realize that India's first and foremost concern is water and NOT power? The international World Watch Institute has already identified India as a water scarcity country in the coming millennium. How should we crystallize our perception on the Ganges lean season augmentation? With the Kosi, Gandak and the Mahakali agreements already concluded with India, isn't it high time to mull over Karnali, the last remaining major river? Isn't it India's ENERGY SECURITY CONCERNS that compelled it to build large hydro projects in Bhutan and none in Nepal? How can we address this concern? Should we continue behaving like the sitting duck ìsitting prettilyî that we have been doing so far?

Final Word

In conclusion, we have so far been behaving exactly like the foolish sitting duck, doing nothing but merely wailing about the load shedding and the high electricity tariff. The mega multipurpose projects like Pancheshwar, Karnali-Chisapani and Sapta Kosi are all merely on the drawing board. In his recent visit to Nepal, the American Deputy Assistant Secretary of Energy, Mr. Calvin Humphrey, stated that Nepal must keep its national interest foremost and never jeopardize the future of the Nepalese unborn as well when developing its natural resources. This is a very, very genuine piece of advice. That is, if we care to listen. For in our quest to quickly become the ìflying geeseî like Bhutan without doing the thorough homework, there is always the great danger of being shot into a ìlamed duckî like Paraguay. So what do we want to be? Where do we want to go? The final choice is ours, of course!