Opinion (Spotlight Weekly)

Hydro Privatization And Nepal

By AB Thapa

Recently in trade and industry related deliberations the privatization has become the buzzword even in Nepal. In several areas of economic activities and development the liberalization and privatization have already become indispensable for the growth of commerce and industry. Nowadays countries all over the world are seen doing a great deal of homework to widen the area to be opened for the participation of the private sector.. However, wherever a country failed to carry out exhaustive exercise the ultimate result that followed from the privatization has not infrequently been proven to be quite harmful to that nation.

National Interest Sacrificed

In Nepal the handling of private sector in the development of water resources has not only raised suspicions in the people's minds of sincerity in dealings but has even provided glaring proof of the outright sacrifice of the interest of the people and the country to please the private developers. Any ordinary person in Nepal knows perfectly well that the electricity generation in our country is in surplus to our requirement in summer monsoon periods and in deficit during the winter and dry seasons, and thus we should have never agreed to buy electricity from the privately owned Khimti hydropower which generates 60 MW during the wet monsoon season and just only about 18 MW during the dry season when the demand for the electricity is the highest. The electricity generation pattern of other privately owned hydro powers such as the Bhotekosi, Indrawati are not any better. Construction of this type of hydropower could never be justified under any circumstances for the supply of electricity to our power grid. Why it was necessary to build this type of hydropower? There could hardly be any satisfactory answer to this question. In a recently published article the former Managing Director of NEA Mr. S.B. Pun and M.P. Pradhan have unfolded the horrific story that unequivocally depicts the terrible ordeal the NEA was going through " The developer could literally, in the name of foreign investment, rampage through Secretaries, Ministers, NPC members and even the Prime Minister in the manner they wishÖÖWith the lady American ambassador putting her full weight behind the IPP and MOWR awaiting instructions from higher ups, Kali Gandaki A developed into a very hot potatoÖÖÖ Ultimately, Rodney Addison of the ADB itself and Dr. Niranjan Kapali ( who was the HMG side project manager) had to literally plead with the lady Ambassador to leave this (Kali Gandaki A Project) in the Public Sector domain." These are highly embracing revelations that cast serious doubts on good intention of the great upsurge of the interest of the private developers in Nepal's hydropower development.

Distorted Planning

The hydropower projects implemented under the guidance of the foreign donors in the past have been well planned following the standard engineering practices. However, over the last decade our power development plans have been thrown into a complete disarray by foreign private developers who were virtually given free hand in planning as well as implementation of the hydropower projects. There was nobody to seriously challenge the cost estimate when the private developer revised the original cost of the 60 MW Khimti hydropower operating at a very high head of 650 meters estimated at about 70 million US Dollars based on the feasibility study of the project carried out under the supervision of the NORPOWER to about 140 million US Dollars to calculate the selling price of the electricity to the NEA The task of the regulatory body even now has remained as a mere formality. It would certainly be not too much exaggerating to say that the private developers have virtually become parasites on the NEA and they are obstructing healthy development of the power sector in our country. However, it would be unjust to raise the accusing finger only on the private developers. The concerned government institution and the decision makers are equally responsible for such state of affair because ultimately the right to make the final decision is vested in those who are in the government.

In recent years much talks are going on about the possibility of involving the private sector in speedy development of our mega hydropower projects. We do not yet know that the development of mega hydropower project is a difficult task and it takes a very long time to complete such projects. Unfortunately private developers are trying to exploit the weakness of some of our decision makers to get hold of our large hydro projects. We could learn a great deal from the recent experience of China about the way exceptionally large hydro projects should be handled.

Karnali Project vs China's Three Gorges Project

The Karnali Project of Nepal and the Three Gorges Project(TGP) of China are both very large projects. Both of these projects are comparable in size. The total volume of the Karnali reservoir is about 39 billion cubic meters whereas the volume of the TGP reservoir is also about 39 billion cubic meters. After the full development of these projects the total installed capacity of the Karnali Project would be about 16 million KW, whereas the capacity of the TGP would be 18 million KW. Both of these projects can provide enormously large flood control, navigation and irrigation benefits. It is interesting to note the views the people at decision making level are seen to be holding on implementation of these extremely large projects. It is reported in the journal "Water Power & DAM CONSTRUCTION" that since 1950 careful comparisons and studies, besides heated debates, have been made on the choice of TRG dam height and it was not until the end of the 1980s that the final decision was made. Mr. Lu Youmen, President of the TRG Development Corporation has written in the same above mentioned technical journal " Having been a DREAM FOR THE CHINESE for more than 70 years, the TRG Project is a key part of the scheme for the harnessing and development of the Yangtse River. In April, 1992 the decision to proceed with the construction of the project was officially approved." According to the original schedule the TRG Project construction is expected to be completed by 2010. Thus it is seen that it is taking China, a country capable to finance the entire cost of the project on its own without external financial assistance and also in a position to fully utilize the entire electricity within the country itself ( at present the total installed capacity of China is about 300 million KW against slightly over 100 million KW of India), about 60 years to implement the TRG Project. Unfortunately Nepal is completely unaware of various difficult problems a country will have to confront in the implementation of exceptionally large hydraulic projects. Nepal does not appear to find it necessary even to consult some of the highly qualified experts to seek advice on this very important matter. We are in a haste to be rich by implementing our large hydro projects. We are being taught all the time a misleading lesson to persuade us to hand over quickly our mega projects to private developers" water lost is money lost." We hope to implement the Karnali project much faster. Our planners appear to be thinking to overtake China in the performance to implement speedily very large hydro projects. So it should not surprise anyone that our country could now be played in the hands of some of those clever private companies who are already seen to be determined to make fortune by exploiting our ignorance.

West Seti Project, SMEC & Terai Submersion

It has been very recently reported in local media that the representatives of Australia's Snow Mountain Engineering Company (SMEC) met the Minister of Water Resources Dipak Gyawali, and senior officials at the ministry to express their commitment to go ahead with the West Seti hydro-electricity project. The last deadline to produce financial management details by company had expired in December 2002. The company had applied to extend the deadline for the fifth time just before the expiry of the deadline. The government had asked SMEC to justify its request to extend the deadline. Everybody is hoping that the present water resources ministry headed by one of the person long since involved in water resources problem of our country will defer the decision to implement the West Seti Project until the following matters are settled.

West Seti Downstream Benefit

The following are the few sentences from the article written by Manisha Aryal published in HIMAL July/Aug 1995. "ÖThe Director of Water and Energy Commission is critical of the West Seti project because it is being developed only as a power project. The vast irrigation benefits accruable from the West Seti High Dam Project will completely slip out of our hands for ever if it is done so (it means without resolving the problem of downstream irrigation benefit recovery)". Based on the feasibility study of the West Seti Project carried out by the SOGREAH of France, if the year 2003 is taken as the reference year and the 1989 price level is adopted at a discount rate of 10%, the total net discounted power benefit could be about 456 million US Dollars. Similarly based on the feasibility study of the Karnali High Dam Project the total net irrigation benefit (downstream benefit) discounted at 10% taking 2003 as the reference year at 1989 price level accruable to India could be as high as 720 Million US Dollars. It should be mentioned here that in a similar type of situation the USA had agreed to share with Canada 50% downstream benefit virtually in perpetuity under the Columbia River Treaty signed between the USA and Canada. Nepal should always remember the fact that despite the tremendous US pressure, Canada declined to take up the Columbia river projects until the USA was fully committed to share with Canada the downstream benefits under the Columbia River Treaty.

Guarantee Against Flood Catastrophe

The submersion of lands in southern Terai of Western Nepal resulting from the structures built in India has emerged as a problem of the greatest importance to our country. Four districts of the western Terai are affected. Few years ago the flooding was limited to Banke district along the banks of the West Rapti river. Subsequently it extended further east to Kapilabastu and Rupandehi districts. It might surprise many of us to learn that we ourselves might be responsible to a great extent for the submersion of our lands that has caused widespread human suffering in Nepal. Now India is building the Saryu canal very close to Indo-Nepal border to deliver regulated flow of the West Seti River. If the attention of our country is not immediately drawn to this problem and its solution is not found before we take decision to implement the West Seti Project, the flood situation is going to be far worse in the years ahead and we would also loose our ability to exercise our control over this situation.

Dam Safety

It has been proposed to build a 187 meters high concrete faced rockfilled dam (cfrd) across the West Seti. This type of dam is a completely new venture for the dam of this height. In a similar situation the German experts had considered it risky to adopt this type of dam for the Kankai High Dam (though the height of the Kankai dam was only about 100 meters), nevertheless, there has been some improvement of the cfrd technology in recent years. It is hoped that the decision makers will take seriously the opinion expressed by the WECS. German Government had assigned a panel under a renowned professor of the Engineering Geology from Paris, who was an authority in this field, to review the Kankai dam safety study. It is absolutely necessary that the West Seti dam study be thoroughly reviewed before taking the decision to implement. Let us not forget the fact that our Kulekhani dam was on the verge of collapse few years after the completion of its construction because we overlooked the adverse geological conditions. The Kulekhani dam could be saved with great difficulties.