Hydropower

Yet all indications are that key government agencies and corporate players are gearing up for initiating just such large-scale projects. A seminar headed by the U.S. Embassy in Nepal, held late last week at the Hotel Radisson in Kathmandu and titled “Empowering Nepal — Connecting Markets,” had as its stated aim “to bring together U.S. companies and other investors with key officials from relevant government agencies in Nepal and India to highlight the substantial opportunities to invest in Nepal’s hydropower sector” [21]. Jointly organized by USAID-Nepal, the Nepal-U.S. Chamber of Commerce and Industry (NUSACCI), the American Chamber of Commerce in India (AMCHAM-India), and the International Resource Group (IRG), the seminar connected U.S. and Indian corporations with government energy regulators in Nepal. Representatives of U.S. corporate giants General Electric and Alcoa, and Indian corporate giants Reliance Energy and Tata Power Company, reportedly met with heads of the Nepal Electricity Authority (NEA), Department of Energy Development (DoED) and Independent Power Producers’ Association of Nepal (IPPAN) [22].

Projects up for grabs at the seminar constitute a total generating capacity of 14,000 megawatts, nearly 30 times the current output of Nepal’s entire hydropower system, earmarked exclusively for export to India. Among the offerings was the Arun III Project (402 megawatts), originally proposed over 10 years ago with backing from the World Bank, estimated at the time to cost $1.1 billion (versus an annual Nepalese budget of roughly $700 million) but ultimately scrapped in response to concerted efforts by a grassroots movement, the first of its kind in Nepal [23]. Martin Karcher, a division chief at the World Bank and member of the department involved in the proposed operation, resigned from his post amid “reservations and misgivings,” remarking in an interview: “The project was not being handled in an objective and even-handed manner. Since senior management seemed to be committed to the project, a serious and open debate was no longer possible and even common sense questions were being dismissed” [24].

Another project on offer, Kaligandaki II (660 megawatts), is a follow-up to the largest existing hydropower project in Nepal, the Kaligandaki Dam (144 megawatts), situated in the deepest river gorge on earth, an area home to abundant vegetation and wildlife. Constructed in 2000 amid controversy over the effects it would have both on the indigenous people in the area and on the environment, the dam has since resulted in flooding leading to soil erosion as well as persistent droughts, putting an end to the local fisheries industry. Kavati Rai, a postgraduate student who studied the effects of dam building on communities, noted that “Kaligandaki is one of the first [projects in Nepal] where indigenous groups have been impacted, so they are learning slowly” [25]. The follow-up project, should it be carried out, will likely wreak an even heavier toll.

Karnali-Chisapani

Yet the Arun III and Kaligandaki projects pale in comparison to the true “jewel” [26], the rivers and gorges of the Karnali basin in western Nepal, an area with numerous sites capable of producing immense quantities of cheap hydroelectric power. Central among proposals for this region is the Karnali-Chisapani mega-dam project, a long-time dream of political and corporate players both within and outside of Nepal. According to the latest design, the rock-fill dam would climb to a towering 270 meters, permanently inundating 339 square kilometers of land in the mid-west valley of Nepal, displacing 60,000 inhabitants, to create a massive reservoir. With a storage volume of 20 billion cubic meters, the dam’s reservoir and its projected output of 10,800 megawatts — amounting to more than two-thirds of the total generating capacity currently on offer — rival the enormity of the 18,200 megawatt Three Gorges Project (TGP) in China. Yet in contrast to the Chinese dam, the Nepalese proposal has received little attention outside of Nepal, other than among corporate circles with interests in the project.

Plans for realizing the Karnali-Chisapani project first took shape ten years ago, in 1996, with a proposal from a “prestigious” upstart American multinational. As Ajaya Dixit describes it, “Enron, with no track record of building a single hydropower project anywhere in the world, opted for the mighty 10,800 Mw Karnali hydropower project.” Nepalese officials, enamored by “the philosophy of building high dams,” were only too happy to accommodate; yet the American corporation, “in typical Enron fashion, did not make its approach through the official channel,” opting instead to “forward its application through the prime minister’s office” [27]. Deepak Gyawali, a hydropower expert, remarked at the time that the survey license awarded to Enron, ostensibly arrived at via “political consensus,” in fact “involved only four politicians in a room” [28].

Enron’s plans for Karnali-Chisapani ultimately failed to materialize, due not to political resistance — all parties were happy to oblige — but to political disorganization. A notable exception was then Water Resources Minister Sailaja Acharya, who had written to Enron requesting that the project be deferred pending further investigation. Santa Bahadur Pun, former managing director of the NEA, in an article coauthored by Prachar Mansingh Pradhan, describes the political fallout of this move:

Our Parliamentarians were so much “educated” with the virtues of private sector and foreign investment that even her own Congress Party wailed and bemoaned that she had killed the goose that would have surely laid the golden eggs.… One can only conjecture what damages Nepal would have incurred if our Parliamentarians’ supposed golden goose, Enron, had drowned clutching the Karnali Chisapani license [29].

Reports indicate that an American company (Texas Power) and a group of non-resident Nepalese backed by Russian banks and consultants are currently vying to get a hold of this very same license [30]. The “golden goose,” it would seem, did not drown so easily; it remains to be seen what damage Nepal will incur this time around.

West Seti

Karnali-Chisapani is not the only project in the Karnali basin, however. Unmentioned in reports of the recent meeting in Kathmandu is the 750-megawatt West Seti project, to be built by Australia’s Snowy Mountain Engineering Corporation (SMEC) with financing from China’s Export-Import Bank and the Asian Development Bank (ADB) [31, 32]. With a height of 195 meters, the concrete faced rock-fill dam (CFRD) at West Seti would be the highest of its kind in the world, comparable dams in China and Mexico rising to 180 meters and 185.5 meters, respectively. Thapa writes that “the embankment type of dam with impervious earthen core is the best suited for the proposed site.” Yet the CFRD-type was chosen as a low-cost alternative, with potentially grave consequences:

Our government has not cared to consult a panel of internationally known competent experts to verify the reliability of the design of the proposed dam. It is very clear that tens of thousands of people would be killed if the West Seti dam collapsed due to faulty design. Vast areas of land in Nepal and India would be laid waste with sand deposits [33].

There is another issue that arises with West Seti, also crucial in the case of the Karnali-Chisapani Project, referred to as “downstream benefits.” Described as “the most contentious issue in water resources cooperation between Nepal and India,” these are mediating effects on water levels, incurred in India, that result from massive storage-type hydroelectric projects such as West Seti and Karnali-Chisapani. Water is collected during monsoon season, preventing floods, and later released to provide irrigation benefits in the dry season. Whereas India clearly profits from this arrangement, in Nepal large swaths of land are submerged, displacing thousands of inhabitants [34]. In terms of dollar value, Thapa writes that “the net irrigation benefit of the West Seti project could be much greater than the net power benefit,” although this benefit is typically ignored in calculations [20]. A similar discrepancy arises in the case of Karnali-Chisapani [35]. In the latest deal, according to a “highly placed DoED official,” the government will “settle” this dollar value issue with India, leaving “the private sector to take care of the rest,” notably including “rehabilitation and compensation for inundation of land in Nepal” [30].

A Possible Deal

The importance of Chairman Prachanda’s political influence, given the recent convergence of interests in Nepal’s vast hydroelectric potential, becomes clear in light of the fact that the populations by far most affected by the mega-dam projects are among his strongest supporters. The west of Nepal, notably encompassing the Karnali-Chisapani (10,800 megawatts), Pancheswore (6,480 megawatts), and West Seti (750 megawatts) proposed project sites, is truly the mother load for the corporate hydropower developer: abundant low-cost, high-output sources, and a government that has consistently “promulgated a hydropower policy considered to be very private sector friendly,” this according to the former managing director of the NEA, Janak Lal Karmacharya [36], also a former consultant to the World Bank and Bechtel [37]. The fact that the west of Nepal is also a Maoist stronghold, controlled by Prachanda and his now “capital-friendly” entourage, is rarely mentioned by the press in the context of hydropower discussions; surely, however, the issues of Maoist arms reduction and hydropower development are strongly linked.

Recently described at as “emerging from a decade-long holding pattern” [38], the global hydropower industry is on the verge of taking off, with Nepal a central focus. Prachanda has reiterated that he favors “the initiation of small and big hydroelectric projects” [39], yet obstacles such as Clause 126 of the current constitution, as well as Maoist armed resistance, pose a serious problem for implementing large-scale projects. Given this situation, it seems reasonable to speculate that Prachanda’s recent ideological change-of-heart — reassuring corporate investors that Nepal is “open for business” — has been triggered by corporate or political offers of some kind; recent overtures by the Indian ambassador present one possible avenue for such deal-making.

Nor would such a connection be as unprecedented as one might think. The communist leader once worked for USAID, the American government agency with a notorious record of co-opting grassroots movements — particularly in poor South American countries — with disastrous consequences. He may have learned from this experience a valuable lesson. As Rajinder Puri keenly observes: “All politics today, including revolutionaries and NGOs, has become corporate activity. It matters little if money comes from governments, agencies or business houses. What matters is the agenda that is followed” [40]. Yet as Prachanda’s “agenda” has increasingly narrowed, so too has he lost sight of the real people of Nepal. Pablo Sanchez, a Marxist, notes, “Maoist realpolitik means that removal of the monarchy becomes an end in itself, no matter who you ally with. This is a very risky policy indeed” [41].

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