Steady supply of clean power crucial for development

MAR 10 - With an elected government in office, Nepal’s political process is looking up. Development partners see this as a window of opportunity to get much needed reforms back on track, which will vastly contribute to foreign investment in capital-intensive projects, including the under-performing hydropower sector. The International Finance Corporation, a member of the World Bank Group, recently initiated closed-door consultations with new Finance Minister Ram Sharan Mahat and Rastra Bank governor Yubaraj Khatiwada, among others. Among experts invited for panel discussions was Ajaya Dixit, a water resources engineer. Pranaya SJB Rana and Dewan Rai spoke to Dixit about the broader hydrwopower debate, how activism in the 90s contributed to hydro underdevelopment and the important, often contentious, relations with India in sharing water resources.

Since the formation of a pro-market NC-led government, there has been renewed interest in hydropower. Has there been a better time to focus on developing the hydropower sector?


The expectation of political stability seems to have generated interest among donors, national and international actors and renewed calls for reforms. The present government must learn from post 1990 experience when Nepal faced a neo-liberal agenda pushed as an ideology, even though Nepal had very little wherewithal to deal with its tenets. Nepal needed to introduce various reforms but also required safety net and other social support systems. Our governments, of the NC and left parties, which espoused democratic socialism, were overwhelmed by hubris. The governments failed to put in place appropriate regulatory mechanisms that would balance market interest with the capacity of the population and local institutions. Today, we can see the worsening performance of basic public institutions. Nepal does need more investments and reforms to achieve higher growth and meet social development goals. Reforms, however, are not only about rate of returns and cost benefit calculus but also about adherence to rule of law, access to information and just mechanism for distributional benefits across society.

What are some obstacles to developing hydropower?

Some of the barriers are inconsistent policy, procedural delays, poor coordination among government agencies and interference of cartels and syndicates. A glaring one is lack of vision. We can examine a recent pronouncement as food for thought. While inaugurating a trade fair organised by FNCCI and Ministry of Trade and Commerce, President Ram Baran Yadav stressed the need to promote Nepali products locally and globally. Nepal’s business community and a section of the government seem to recognise that the Nepali economy needs to be diversified; we produce high value goods and trade them globally. This framework can be Nepal’s engine of growth but it is not possible without 24/7 supply of clean energy. Hydro-power can be a cornerstone of this framework, within which state agencies, utilities, regulatory commissions, IPPs, banks and community groups play their roles. This framework is counter to the prevailing political eco-nomy, which stipulates that Nepal will become rich by exporting energy. The former framework has the potential to take the Nepali people on a path to prosperity while the latter would provide financial gains to the government with royalties, if selling rates are agreed. In the meantime, we must over-come barriers and build problem-solving skills, improve implementation and compliance, monitor, learn and adapt to emerging constraints and make adaptive policies. There is no shortcut to prosperity.

Would you say that activism in the 90s against big hydropower projects contributed to holding back the hydropower sector?

Dam building and hydropower have been major elements of the development process. Earlier efforts brought many benefits but also high social and environmental costs that remained un-mitigated. Environmental movements globally highlighted and questioned these costs, calling for changes in prevailing practices. For me, the 1980s and 1990s were periods of unlearning because the science I had been educated with did not seem to deliver what it promised. Nepali women had to walk three hours to get drinking water, irrigation systems did not function, very few Nepalis had access to energy and our technological capacity was very low. Nepalis were sick because they did not use toilets. These realities continue. Science taught me to look around, ask questions, critique, seek answers, propose ideas and be questioned. Yes, I was part of the critical discourse. I contributed to expand understanding, introducing inter-disciplinarity in water education and pluralizing the policy space. These are useful starting points for proposing new business models to developing hydropower as well as building societal resilience in the face of vulnerability to global climate change.

Some would argue that one of the flaws of democracy is that so much time is spent on debating that things often take a long time to get moving. Was that what happened?

Alternative to democracy is more stable democracy. In the era prior to 1990, critical development questions could not be asked while societal pains, concerns, expectations and difficulties were kept under the carpet. Even during the era of democratic polity these issues remained unheard. Our challenge is to formulate a social and political compact that will nurture an innovative architecture of hydropower development within a broader framework that suits our natural and social landscape. Hydro is not only energy but also water that has multiple functions: agriculture, health, recreation, fishery, culture and ecosystem. It is also about climatic disasters such as floods, landslides and sedimentation that pose serious risks to projects and infrastructures. We need stable democracy to be able to better understand different aspects of water and its uses.

If the Arun III project, to which many, including you, were opposed, had come online, wouldn’t that have created more opportunities for investment and manufacturing?


Prior to 1990, Nepal followed a unitary hydropower development path. Finance would come from donors, projects would be designed and implemented by international consultants and contractors. The Arun project continued this model, which did not build local technical capacity nor enhance the national manufacturing base or create opportunities for local investors. When multiparty democracy began, many questions were raised: why were no Nepali technical experts, investors, banking sector or community groups part of this enterprise? High costs and donor’s conditions were also questioned. Between 1996 and 2002, Nepal was able to add more than 300 MW to the system through private and public investments. From 1911, when hydropower first came to Nepal, to 1996, Nepal produced less than 300 MW. The idea that Nepali private investors and bankers would also be involved in producing electricity and that community groups will distribute electricity was inconceivable in early 1990s. The achievement of 1996-2002 has since slipped into the dark pits of power cuts. This policy paralysis needs to be critically examined and this is best done by a younger generation. The debates also produced ideas such as local currency bonds to raise money for hydropower development. It seems IFC is currently seeking to issue such bonds in concurrence with the government and Nepal Rastra Bank. The bond may help channel capital, including remittance income, into hydropower investment.

So who is responsible for us living in 12 hours of darkness each day?


We have to look at these questions in a historical context. When the democratic journey began, the Nepali state, political parties and all of us had to learn to deal with globalisation and liberalisation. The state was unable to meet its many obligations and deliver services.  The insurgency, palace massacre and derailed democratic process, including no local elections, set in a policy paralysis. So it is hard to pinpoint responsibility. As we move forward now, our elected representative must be made responsible and accountable for governance and policy framing. The conduct of past legislatures was unsatisfactory. This must change and the new political order must begin consolidating gains while avoiding past mistakes. Recent news reports, however, do not inspire confidence. Few days ago, speaker Subas Nembang had to adjourn the CA meeting for a lack of quorum, as representatives were chitchatting and sipping tea while discussions on ordinance were going on. Elected representatives need to take a deep breath, reflect and do some soul searching about their historical responsibility. Let us also remember those Nepalis still without access to even basic light.

Nepal has a number of treaties with India concerning hydropower and our rivers. The question of power sharing with India inevitably comes up. How do we address this issue when we ourselves are under loadshedding?

India is our friend; we are members of the same civilisation. But there is power asymmetry between the two countries and this tends to fuel a sense of frustration on the weaker side because it is not easy to convince big brother. I would call India our elder sister, though this idea is not mine. Elder sisters are kind, listen, understand and accept. Still, the geopolitical context remains. The Himalayan hydrology requi-res us to put flood mitigation, irrigation and climate change vulnerabilities on the table. In the immediate, our government’s priority must be to overcome endemic loadshedding. Let us begin to unpack the notion of cooperation and develop modalities for sharing forward and backward linkage benefits.

On a final note, the Mahakali treaty is back in the news after a long time, with Prime Minister Sushil Koirala’s recent statements concerning Tanakpur. The agreement is reportedly moving forward now. Given the widespread opposition back when the treaty was signed, how do you feel about it?


The Mahakali treaty includes Pancheswor dam and also incorporates Tanakpur and Sarada barrages. The Sarada barrage feeds Sarada canal system, which epitomised the peak of a centralised, top down, bureaucratic and engineering-led paradigm. Engineering is necessary but this approach considered ecosystems, gender, participation, displacement and equity as peripheral. The Mahakali treaty is a manifestation of this paradigm and its critique juxtaposed the role of the state, geopolitics, national politics, water resources and conception of development as well as peripheral elements. How will Mahakali treaty and the proposed Pancheswor dam help improve overall wellbeing of our two countries, our people and build trust further? What institutional innovations will meet the changing needs and aspirations? Let our two governments answer these questions.

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