The road to 10,000 MW

ekantipur, 14-Feb-09
Peeyush Tiwari

The issue of hydropower development is once again in the spotlight. Unlike in the past, the present government seems quite serious about the development of hydropower in the country and attaining the much talked about goal of generating 10000 MW in 10 years and two digit growth figure within the next three years. Honestly, water resources is by far the only resources we can really bank upon; since other resources such as petroleum are out of the question, and the industrial resource is still a far cry. Similarly, our experience with tourism shows that we have not been able to actually leapfrog in economic development as expected.

Nepal's water resources have been by far a wasted asset. Though its potential is never undermined, we have not been able to tap into this goldmine and reap the benefits. Although water resources have seemingly unlimited uses, looking into the picture, and the overall development of the nation at stake, hydropower seems to be the only option. That is, if we are talking about being export oriented and such. The much hyped 83,000 MW potential and 43,000 MW which the experts believe to be economically viable indicates that our power market must be export-oriented. And given Nepal's geographical location, it is clear that India is our only market. The chairman of Power Trading Corporation of India (PTC), Mr. T.N. Thakur, during his visit to Nepal has clearly indicated that within the next 10 years, India is looking forward to develop 50,000 MW of hydropower, though it will need 140,000 MW of power within that time. It doesn't need a rocket scientist to understand that there should be supply when there is demand in the market. It is estimated that the cost of generating 10,000 MW of energy would cost about NRs. 200 billion. Since such a huge investment is not quite practical for a fragile economy like ours, and for the local investors, investing in hydropower is regarded as too big a gamble. This is where the issue of attracting foreign investors comes in.

In the last decade, the country has seen some landmark agreements regarding foreign investments in the hydropower sector. In 1995, the government of Nepal signed a deal with SMEC for the development of the 750 MW West Seti Hydroelectric project. This agreement was signed as a Public Private Participation (PPP), with the government of Nepal investing 15 percent (with loan from ADB). Similarly, the past year saw the agreements reached between the government of Nepal and Sutlej Jal Vidyut Nigam (SJVN) for the development of the 402 MW Arun-III hydel project, and GMR-ITD Consortium for the development of 300 MW Upper Karnali Project.

The issue of water resources management has been fiercely debated. Some people have preset notions about the dealings with India and have repeatedly raised the issue of past deals such as the Koshi, Gandaki and Mahakali Treaties where Nepal did not quite receive the benefits it was entitled to. During his visit to Nepal, the Indian State Minister for Energy and Commerce, Mr. Jairam Ramesh said in a televised interview that we must not spend our time pondering over the past; that we must look into the future and work towards it. India will try to reap as much benefit from a deal as it can. It is their duty towards their people. That's what we too must do. It's our duty to get good deals out of our agreements. In the recent agreements of Arun-III, Upper Karnali and West Seti, I think our country has got good deals with the private developers. These projects are to be implemented on the Build Own Operate Transfer (BOOT) principle, where the projects would be handed over to the Government of Nepal "in good running condition" after 30 years of operation. So, if the goal of 10,000 MW in 10 years is attained and all the power is exported, we will have at least 1000 MW for free, which is nearly double what we have been able to generate in the past 100 years.

However, to attain such goal, the challenges need to be met. Investors are a sensitive lot. The government needs to ensure that there is an investment-friendly environment so that they can feel safe to invest here. Having potential alone doesn't guarantee investors. For example, we could not find any investors for the 650 MW Burhi Gandaki. Even after calling the Expression of Interest (EOI) twice, no investors turned up. We must take an example of the Tata Motors pullout from Singur after investing billions; we cannot afford to bear such a letdown. We must work our best to convince the investors that investing in Nepal wouldn't be risky. The issues regarding displacement of locals and ecosystem are in place; but we must look for the proper management of such issues. An example can be made of the 18,200 MW (stated to be finally 22,400 MW) Three Gorges Project of China, where 1.2 million people were successfully relocated.

Lastly, after the recent political breakthrough, it's high time for the country to attain an economic breakthrough. As Mr. Jairam Ramesh had said, all this time we have been born members of the NATO (No Action Talk Only). Now we need to change that perspective. Concrete measures need to be taken to transform this decade into a decade of economic revolution, as finance minister Dr. Baburam Bhattarai hinted in his budged speech. It's imperative that we now do something so that the next generation will regard the first decade of the 21st century as the dawn of development.