(In need of immediate development rather than ridiculous long term गोअल्स)
- सागरताम्रकार
If there’s one sector that can tackle all the burning issues of the country – unemployment, poor economy, poor relations with the neighbouring countries, it could only be hydropower (HP) development. With immense hydro resources, Nepal being poor is unjustifiable. Currently, the only reason it’s sinking into poverty is political instability and poor governance which led to poor vision, policies and production in the country. Gyanendra L Pradhan, chairman, Hydro Solutions, refers the present scenario of hydropower to that of the musk deer searching out for musk all round the wild, never knowing that it’s produced in its own body. Pradhan says, “Nepal could not identify its potential in the past, thus is facing the present situation. Instead, Nepal had been trying to move up in the field of garment, vegetable oil, carpet export, which all led to its failure.” He further elaborates, “Any country should long to develop in the sector in which it has immense potential and that should be its concentration. Like gulf countries can never long to develop water resources but petroleum.”
With the current power crisis in place, it is reprehensible to point that the history of electrification in Nepal dates back to 1911, with the operation of Pharping Hydropower station. The electricity produced was only limited to supplying the well up Rana families; the development aspects of electricity were never considered. It was only after the evolution of democracy in 1950 that Nepali Congress took the initiative to develop hydropower in the country and formulated Koshi Treaty. Pradhan says, “Koshi Treaty was such a fine agreement with India that it attracted India to cover all the costs for Nepal’s benefit, but the efforts were all ditched after 1960 when the democracy was confiscated by autocracy who lobbied against the treaty saying that they sold Nepali rivers to India.” Through all the 30 years of Panchayat regime, the misconception that Nepal should not make any treaties with India regarding water resources was spread over and no development in hydropower was seen. Shedding light on the 40 year Panchayat system, Pradhan pointed out, “The only great vision that evolved during the Panchayat regime was that of paving the East-West Highway which opened the doors to a lot of developmental activities. During King Birendra’s regime, Nepal was declared Peace Zone, activities were carried on to retain it a peace zone and no developmental works were cashed in.” He further explains, “This declining attitude of Nepal chilled down its relations with India. Instead of strengthening ties with neighbouring India, King Birendra requested for a power plant with Japan when Nepal started having slight load shedding caused by a 50 MW energy deficit.” Devghat for Saptagandaki Hydropower plant was proposed by Japan which had the potential of generating 225 MW which was excessive for Nepal and diverted the excessive water for irrigating and fertilising Chitwan, Nawalparasi and building the plant in three phases producing 75 MW in each as per the necessity of the country. Such a fine project could not be accepted by the Nepali mindset, and it failed to implement.
Sujit Acharya, CEO, IDS Energy, holds a different opinion regarding Nepal’s HP ties with India. India, he considers, is Nepal’s feasible market currently who is in serious need of hydropower. Acharya elaborates, “India is currently generating 25000 MW of electricity out of which only 1200 MW is being generated by the private sector; thus, India is not that expert in HP that we have been relying on it to help us out in HP production. It should have been the other way round that we gain the expertise from China which owns 700000 MW electricity, to develop hydropower in Nepal and sell the expertise as well as electricity to India.” The Three Gorges’ HP project (24000 MW) is the world’s largest HP project constructed by China proves its expertise in developing HP in Nepal. Besides being the engineering expert for all types of HP projects, China is also the world’s largest supplier of HP equipments; therefore, we shall make a move in importing Chinese proficiency in hydropower production and exporting surplus power to the southern neighbour India. Nepal is strategically located between China and India that the realisation of this benefit will take it to greater heights making Nepal cream of the sandwich. Acharya points out, “Nepali policy makers are never seen to grasp the fact of getting appropriate resources from the right place/country. The government should make an effort in welcoming Chinese expertise to Nepal for the development of HP instead of finding the overall solution with India.”
As a matter of fact, Nepal was the first country in the South Asia and neighbouring China to adopt economic liberalization policy in 1990 with the abolition of Panchayat regime. Also, Nepal demonstrated a great deal of vision in hydropower development in the country more than what India had envisaged. The policy attracted the domestic and foreign investors but the trend of digging up negative aspects of the policy arose the dispute. The dispute resulted in nothingness which is evident from non-materialisation of the Hydropower Policy formed 17 years ago and the redraft of the policy two years back still in the offing for the parliamentary approval. About India taking a huge leap in HP development, Pradhan comments, “Though India started HP development later than Nepal, India adopted the policy of revising the policy regularly in the interval of three months because of which its policy is far ahead of that of Nepal. Free economic policy and free market policy of electricity tariff which gets fixed in stock exchange as per its demand are the major leaps that India took to move ahead in energy sector, but in Nepal, the policies remain stagnant and there are excessive delays in the government deals which have contributed to the present bizarre situation.” After the republicanism in Nepal, vocal commitments on hydropower development evolved, Pradhan says, “Maoists who targeted exploding our Pyuthan power plant during insurgency understood the value of hydropower and set a target of 10000 MW in 10 years which posed to be highly ambitious but as we worked along, we found it possible.” The government fell and another government was formed which scrapped the vision and came up with more ambitious one just to win the hearts of the public. These attractive political slogans do not contribute to the development.
Hydropower is the gem of Nepal in terms of social, infrastructural, economic and overall development of the country. It is a real solution to unemployment and poverty in the country. Pradhan points out, “A one MW power plant employs about 35,000 people. NEA generates revenue of Rs 15 billion from 500 MW. If we target generating 10000 MW, it alone is more than enough to hold the budget of the country for the whole year.” He further quips, “It took 200 years for America to develop, 60 years for China and seven years for Bhutan, and Nepal belongs to the category of Bhutan that it can develop in short period of time. Besides, Nepal has more capability, has a bigger market and its HP is internationally more salable than that of Bhutan, ie, Nepal has more opportunities but they could not be materialised due to the failure to execute the political vision that evolved with the rise of democracy in the country.” The locals and stakeholders are equally responsible to the arising of present aggravating energy scenario along with the government. In fact, HP is the only sector which abides all the comparative advantages to Nepal. Unlike other multinational investments in Nepal, hydropower is that sector in which the foreign investments can be counted as national investment. E.g., Colgate-Palmolive which when closed down its Nepali wing, left nothing for Nepal, but Bhotekoshi HP project, an American project, which it sold out at cheaper price to the Government of Nepal when it had to leave the country all because it cannot carry the project out of the country.
Analysing the allocation of finance in the country, Pradhan says, “In the year 2008/09, 10000 crore out of 21000 crore remittance that entered Nepal was invested in the real estate which is not less than a gamble that the Durbarmarg land is thrice as expensive as that of Bangkok. Did it do any good to the national economy? Never.” Nepalis should be aware of the fact that investments should be made wisely in long term benefits rather than in nonproductive areas which will one day definitely crash the banking industry and bring down our economy. He points out, “If only the amount which has been lying in real estate can be diverted to hydropower industry, it can generate 800 MW in a year which is equivalent to 5000 GWh or Rs 3000 crore revenue which is more than enough to clear trade deficits with India.” Investments of our hard earned remittance in nonproductive areas has, on the other hand, increased our trade deficit with India and decreased agricultural/industrial products. As per Pradhan, the immediate steps that need to be undertaken are to approve the Hydropower Act which has been pending at the parliament, to skip long term goals and take immediate actions in setting up power plants this FY or in two/three years. “Keeping in mind the above mentioned issues, HP should be let to develop freely bypassing corruption issues for the sake of letting it grow undisturbed because corruption would be negligible in front of the contribution of the project once it completes. The great example of this is evident in Haryana, India where Nehru forgave more than 200 corruption cases in the light of power project completion,” says Pradhan. “The government should leave commercially viable sector to the private sector and only direct them through policies. HP being a commercially viable sector, the government should focus in making encouraging policies only and leave it to the private sector with few exceptions of multipurpose power projects which have commercially nonviable parts embed in them,” comments Pradhan. If only the policies are good, private sector will flood in the HP sector. Another important issue is that electricity should be brought under open market and eliminate the single buyer model, Pradhan states.
In context to the hydropower scenario in Nepal, Acharya prefers to start with the blunder in the calculation of the total HP potential that can be harnessed in this country. He points out, “Our statistics show that the potential of HP production in totality is 83,000 MW which is based on a 1964 PhD dissertation which is now outdated. Actually, the total HP potential of Nepal is 200,000 MW,” and further adds, “We have been relying on a 1964 study of a student who gave us a guideline but no such studies are conducted since then by the concerned authorities, which is a poignant part of the hydropower development in the country.” Besides the statistics of HP potential, the statistics of the number of rivers in the country is also wrong which actually is 15-20 percent more than that of the existing statistics. Based on the research of IDS Energy, the exact data is yet to be finalized which will at least take 3-4 months, Acharya says.
Acharya finds the Hydropower policy defunct and seeks for its holistic reform. He points out, “There are three impediments in the proposed Hydropower Act. The proposed Act which is seemingly friendly to the foreign investors, private sector and locals is not like so actually. Therefore, many issues need to be readdressed in the Act tabled at the parliament otherwise its going to bring a calamity in the HP sector.” Nepal has been able to generate only 0.1-0.2 percent HP of its total potential in due course of a century. Many organisations are celebrating the centennial but Acharya mourns it because we are a hydropower rich nation and are celebrating centennial amidst darkness. Acharya alarms, “If we do not revise the Act scientifically, there are chances that we will again be celebrating another centennial in similar fashion with a mere 2-3 thousand MW of hydropower,” and further adds, “Or may be we won’t get to celebrate another centennial where we can talk about hydropower as a valuable resource because now with the drastic climate change taking place and development of other renewable energy like solar, the value of hydropower could diminish if the changes are not brought about in the policy timely.”
The life period that Department of Electricity Development (DoED) awards a hydropower developer is one of the discrepancies in the hydropower policy that Acharya perceives. When the generation license is provided to the applicant, it is valid for 35 years which means that the license is only for about 28-32 years from the commercial operation date (COD) ready for power generation. In India and Bhutan, the HP license is valid for 40 years from the COD. Because the overall construction cost is increasing by the day and the loan payment period is much shorter, the attraction of the policy is lessened. Acharya inquires, “Which investor will think about investing in Nepal when there are better opportunities in the neighbouring countries?” This is also because investment in hydropower is not like other sectors like trading business or building an apartment. If one builds an immense housing project, it probably costs 20-30 crore but if s/he builds a 5 MW HP project, it costs 100 crore and that too in remote place with poor infrastructure, dire geology etc. This fact is generally discouraging to the domestic and foreign investors. The bureaucrats in Nepal are technically ill-educated. Acharya questions, “When we have a person who is unaware of energy matters handle the portfolio of being a minister of energy, what will s/he do? The repercussions of bureaucrats being weak technically impacts upon the foreign investors as well.” There are many critics who lobby against giving license for 40 years forwarding the reason that the government would not receive royalty on renewal after 28-32 years. This theory appears oblivious to Acharya as to why cannot they reform a policy of awarding a license for 40 years and amend a point to raise the royalty after 32 years which the developers will readily accept because they will have been earning much profit by then. When this conflict remains in the licensing, the government cannot find the licensees as expected. Secondly, the government charges generation royalty on the developers even if they haven’t start power generation. Thirdly, Acharya points out, “The option of no license requirement for the power projects <3 st="on">India and Bhutan is 10 years, which will definitely deflect the foreign investors to the neighbouring countries. The government calls upon Indian investors to invest in HP saying that we have very liberal foreign policy but it is basically conflicting its own statement and there are better avenues in India itself. The misleading political slogans of the government of producing some impractical and impossible figures of hydropower are ridiculous, Acharya states.
Another reason HP policy does not award license to real developers is that it says First Come, First Serve. Acharya says, “The concerned authorities should make a point to monitor, survey the projects that the applicants forward and not follow the above mentioned rule which will only take away the license from the hands of the deserving candidates.” Backing the above statement, Acharya adds, “Say an incapable person applied for the license prior to a capable investor, then one option could be the latter buying it from the former at higher cost. This will load the pocket of the former which would otherwise go to the government. Likewise, Nepal government is losing 15000 crores to the brokers in the process of ridiculous licensing.” The stipulated amount is almost 90 percent of the national budget. In India, the government charges Rs 500 thousand to two million IC per MW license. Records even show the GMR paying up to Rs nine million per MW license in a competitive bidding in India. Acharya points out, “Here in Nepal, the hydropower licensing fee is quite low thus providing a big platform for the brokers to play their game. Although the government recently increased the license rate, it is negligible; it increased from Rs 5000 to Rs 50,000 which still is not enough. If the project is of bigger magnitude, the highest charge is Rs one million which is in no way scientific because the market runs in crores.” Therefore, its high time that the policy be revised; otherwise, we’ll be losing an amount as huge as Rs 15000 crore with which we can achieve many developmental activities. The government has not realised its license market and middlemen are making huge out of it. Currently, HP is the talk of the town, everyone are dealing with it but is the government aware of it.
About social disturbances, Acharya comments, “Nepali societies have been criminalised off late. Nepalis have started to commit crime by treating the HP developers like criminals and obstructing in national development. All the plants in Nepal have been disturbed by the locals halting the construction, operation whatsoever.” This has impacted on the domestic Nepali developers developing micro to small HP plants and the barrier to developing big power plants by Nepali developers is the lack of expertise, capital and encouragement from the government. He says, “We have 200,000 MW hydropower potential and Nepal is one of the poorest countries in the world for no reason. If we are to generate 200000 MW, every Nepali will make monthly income of Rs 100,000 without having to work. This is the solution to poverty, social uprisings and excessive politicization in the country.” As a matter of fact, one percent GDP growth requires 1.5 percent energy growth. The most basic need today is the electricity; with load shedding up to 16 hours a day, which industry, factory, business will open up, operate!
Acharya blames Nepal Electricity Authority (NEA), a big loser, of dragging Nepal into the aggravating power crisis. The monopoly buyer of all the electricity produced in Nepal, NEA is all meddled in the excessive human resource, trade unions and mismanagement within it. NEA has been given three mandates – to build the transmission line, to distribute the electricity to the consumer and to generate the electricity. If it only focuses on generation and not looks upon the transmission side means it is not fulfilling its mandate. NEA’s lack of transmission line is contributing to the problem in distributing the electricity. NEA is also undergoing loss for a considerable amount of time. These issues in NEA have been hindering hydropower development in the country. None of the hydropower projects conducted by NEA were either completed in time or completed with a stipulated amount of capital till date. All of the projects have been financed by the government to government loan or by World Bank or bilateral agreements. Acharya points out, “The control of all these mismatches in NEA is possible only through its complete reform which is to be commenced with dividing the authority into three parts- generation unit, transmission unit and distribution unit all of which work as a separate entity.” The employees at the generation side make money while no such money can be earned in the transmission side and distribution is poor too with more than 20 percent of loss incurred during distribution. Since all the units are under the umbrella of NEA, all of its weak holes are being shaded; therefore, if all the three units form separate authorities, they will be bound to make improvements in their respective performances for a better track record.
“The problems in NEA has impacted on the private HP developers with regards to taking loans which gets rejected from private banks for being insecure observing the financial status of its off taker,” says Acharya. On the other hand, the cost of developing hydropower projects has gone up significantly which is aided by the rise in inflation rate and also having to import construction materials, equipments, machineries and even the technical experts from outside. Therefore, another serious reform NEA is supposed to make is revision in the electricity tariff which has remained still after the tariff in other sectors have increased three to four folds. On one hand, power developers seriously need more PPA rates and on the other hand, the tariff problem is persistent mainly because the chairman of NEA is a politician afraid of public uprising on raising the tariff. Also the public gets fiery on having to pay more with lesser electricity being distributed to them.
Commenting on the energy minister Prakash S Mahat’s defence that the 10 year insurgency has dragged the energy sector far behind, Acharya points out, “It is simply a political rhetoric but instead he needs to forward the forthcoming plan, not digging up what happened in the past. Middle Marsyangdi was built during the insurgency, our Piluwa Khola HP project was completed during the insurgency and it has gone public.”
Acharya’s modality of hydropower development to curb poverty is very simple – Imagine there’s one hydropower project in each of the 75 districts in Nepal which are run by the domestic developers under tender appeal. Even a small 3 MW HP project can generate Rs eight crore annual revenue, say 15 percent of it Rs 1.2 crore is separated to the District Development Centre for development of the district. Can’t it build roads, schools, health posts, tele centres? If the projects are upgraded, it brings in more revenue and more development. He states, “This is the beauty of HP that it can contribute a lot in the sustainable development of the rural parts of Nepal. HP is a social entrepreneurship which is to be centred on all the Nepalis, not just the developers but also one of the greatest stakeholders the local communities of the project site who will be contributing to the project directly or indirectly.” Any community standing against the HP project is in a way ceasing the development process in the country. The amount of compensation that the locals demand even ranges more than the cost of the entire project. For eg, there’s a project of building higher capacity transmission line around Kathmandu valley to cater to the growing demand of the valley, but only 3 km of the ring is left to be built at a certain part of Bhaktapur. The residents of the area never allow NEA people to work due to which whole of the Kathmandu valley is suffering. If the locals have problem with the project, they can sue NEA, not protest or obstruct the project that is beneficial to the entire Kathmandu. These issues the local communities ought to keep in mind and try to contribute by participating in the projects instead.
With innumerous predicaments, the government should make holistic change in the Hydropower Act, bringing change to one or two policies is not enough, Acharya emphasizes and adds, “There has to be a holistic level of planning to come up with a fruitful outcome in this sector. Otherwise, we are going to be in the same situation; we have to do a lot of soul searching and we do not have time because in the next 10-15 years, the value of hydropower will lessen with the rise of other renewable energy sources like solar.” Today, one MW of hydropower consumes Rs 17-18 crore and an equal amount is cost in generating one MW of solar electricity, but in the next two years, the cost of producing hydropower will certainly increase but that of solar power will come down to Rs 7-8 crore with the price of silicon decreasing by the day. Ultimately, developers will prefer solar power over hydropower. Also, it takes 8/9 months to build a solar power project whereas the gestation period of a hydropower plant is 3-7 years and that Nepal is a country which has highest amount of sunshine in the world. Therefore, Acharya is anxious that 200000 MW potential is going to remain what it is today, potential! What is the use of having the potential not implemented. So all the Nepalis should be determined towards this front and quit their efforts in protests, politics, instability etc.
Of all odds, Dr Pushpa R Rajkarnikar, one of the conveners of foreign investment policy, points out that the policy recently drafted is encouraging but the only hindrances are political instability, political conflict and insecurity. Rajkarnikar is optimistic that the updated hydropower policy once approved by the cabinet will bring positive changes because it was drafted amidst all the business communities and stakeholders. He quips, “The most important change of all that the government has made in the foreign investment policy is that the incentives which hydropower/industrial policy provides will not be underrated by the economic policy whatsoever, which used to happen in the previous years. This change in the policy has attracted a significant number of foreign investors.” “Hydropower is a competitive advantage of Nepal and it too is highly capital intensive and consumes longer gestation period. Therefore, foreign investment is crucial in the sector but foreign investment policy is waiting for parliamentary approval. Once approved, it has widened the scope of FDI, making foreign investors able to invest in the secondary market (stock),” confirms Rajkarnikar. He concludes remarking that people have different opinions about HP as a power or multipurpose, whether run-of-river HP projects are better than reservoir projects but arguing all the time without implementing into practice is a key hindrance. Immediate implementation of the abundant water resources should be made without being disturbed by arguments all the time.
Currently, foreign investors are coming for a total of 3000 MW in the country which is equivalent to six billion dollars. The government should only pave conducive environment for them to work. West Seti 750 MW, Tamakoshi III 650 MW, Arun 800 MW, Upper Karnali 500 MW, Likhu 120 MW, Marsyangdi 150 MW, Kali Gandaki gorge 250 MW have all opened up their country offices in Nepal and have been paying emoluments to their staff even when the project could not be implemented, which is all because the projects that can be run in Nepal cannot be in other parts of the world, Pradhan relates. He states, “To achieve the hydropower development of this intensity, we need to bypass the lack of coordination of different ministries and brings up one door policy. The best way for this could be keeping Ministry of Energy (MoE) under the prime minister whose supremacy will keep MoE out of different department hassles.” Confirmedly Pradhan says, “If we can only start 2000 MW power plant in the current fiscal year and bring into practice, our GDP will be 12 percent, more than that of China. The overall development will start in the coming six-seven years turning Nepal into a semi developed country in 10 years time and will witness speedy development in 15 years. It will also bring back millions of Nepali human resource which has been working abroad to work in Nepal.”
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