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

-S.B.Pun, Water Resource expert, Nepal

Introduction:

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 "Khera Gairaheko Pani"-waters being wasted-and make plans to take huge quantum leap by exporting over 20,000 MW of power in the coming years. We got to be pragmatic, look around keenly and learn from the experiences of other landlocked and hydropower rich countries like Paraguay and Bhutan, the former a lame duck and the latter heading to be flying geese.

Paraguayan Geopolitice:

Like Nepal, Paraguay is a small landlocked but hydropower rich Latin American country sandwiched between two large countries, Brazil to the North and Argentina to the South. Historically, Paraguay has been economically and politically very much dependent on its southern neighbor, Argentina. Its only outlet to the sea was along the Parana River through Argentina and to the Argentinean port. But there was an 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 world's 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 Argentina's monopoly hold for access to the sea. Not to be outdone, Argentina under its President Peron's personal instruction "sign now and renegotiate later" signed the 2,7000 MW Yacyreta treaty with Paraguay also in 1973.

Itaipu controversies:

There were a host of controversies on the 12, 000 MW of power and 72,000 million Units of energy Itaipu prject between the two countries. They include the height of the dam, disproportionate extent of flooding between the countries, low consumption amount fixed, the frequency of generators for each countries and even the structure of the Itaipu Binacional Administration.

But the main debate withing 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 maximising 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 byer, 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 that is 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. Incidently, 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 manuevering, 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 Paragyayans 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 classic example of the lame 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 WB) wherein the population of Bhutan is given 734,000 for 1950 and for 1998 as 1.9 million. The World Development Report on the otherhand has the 1998/99 population of Bhutan as 736,000 indicating an increase of only 2,000 in 49 years. By contrast, Nepal's 1950 population was 7.9 million and in 1998 this has tripled to 23 million. 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, and 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 its own security a number of north south and an east-west road network within Bhutan. These roads covered the difficult interior terrain and are now perceived as a blessing in disguise. Not only these roads have provided accessibility to the difficult interior terrain for Bhutan's socio-economic 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 neighboring countries. In Sikkim's 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 of IC annually for its development activities. The 10% of Chukha power, which is used internally, is directed very intelligently to power the industries that use indigineously 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 Tribhuban highway linking Kathmandu to the plains, the 1954 Koshi and the Gandak Agreements all came in quick successions. The furore over these agreements in Nepal and the subsequent 1964 Gandak Amendment and the 1966 Koshi agreement revision came only after the short Sin-Indian border clash of 1962.

Our two big neighbors 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; Tribhuban highway replied by the Arniko highway, Siddhartha highwayinto Pokhara replied with the Prithvi highway. The eastwest Mahendra highway has finally been operational with the major portion built by India. Unfortunately, the greater part of Dhankuta/Kathmandu/Pokhara/Surkhet hill road remained merely on the drawing board. This road would have contributed greatly both to 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 neighbors 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:;; Chukha in Bhutan and the 1977 five-year agreement on Farakka with bangladesh.

Nepal's Koshi, 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 and Bihar, West Bengal of India and Nepal and Bangladesh. Despite the 1996 Farakka agreement, the critical issue for both India and Bangladesh is the lean season augumentation of the Ganges. The augumentation by the Pancheshwar storage project under the Mahakali Treaty has unfortunately been summarily waived off by the words "precludes the claim in any form…". 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 gurus, must take due recognition of this fact and decide how we play our card.

Sitting Duck:

Because of the above said 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 "accrued benefits". With an empty coffer, we will definitely have to bear this cost from the quantum of energy to be exported at a "mutually agreed price" which is very tricky indeed due to the monopolistic buyer. Bhutan is selling its 300 MW of hydropower at 1.6 US Cents/KWh whereas, Nepal and India under the 50 MW Power Exchange Agreement (which is now being negotiated for 150 MW) are trading at 4.5 US cents/KWh. Nepal's average tariff as of now is 9.3 US Cents/KWh but India 's average tariff is less than half of that, which is about 4.2 US Cents/Kwh. What do we make out of this? Sell cheap power to Nepalese or Indian industries? 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 scarce country in the coming millennium. How should we crystalize our perception on the Ganges lean season augmentaion?/ With the Koshi, Gandak and the Mahakali agreements already concluded with India , is not 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 hydropower projects in Bhutan and none in Nepal? How can we address this concern? Should we continue behaving like the sitting duck "sitting prettily" 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 multi-purpose projects like Pancheshwar, Karnali-Chisapani and Sapta Koshi are all merely on the drawing board. In his recent visit to Nepal, the American Deputy Assistant Secretary of Energy, Mr. Calvin Humphrey, talking to the government officials at the ministry of water resources, advised that Nepal must keep its national interest foremost and never jeopardise the future of the unborn Nepalese, and while 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 "flying geese" like Bhutan without doing the thorough homework, there is always the great danger of being shot into a "lame duck" like Paraguay. So what do we want to be? Where do we want to go? The final choice is ours, of course.

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