The reduction in the power cut this week is a much relief but the crisis will be back next dry season. Stalling hydro power development during the decade long conflict has proven very costly. The country has been reeling under 18 hours of electricity cut each year in winter and there is power

shortage even if one of the turbines in Kulekhani goes on repair.

It is in this backdrop that Nepal government signed a Memorandum of Understanding with China’s Three Gorges Corporation to construct 750 MW West Seti Project last week. The reservoir project was in limbo for the past 15 years as its promoter Australian company Snowy Mountain Engineering Corporation (SMEC) failed to manage funds.

The Private Public Partnership (PPP) project will be built for domestic consumption under a build, operate, own and transfer (BOOT) mode for a period of 35 years. CTGC will invest 75 per cent share while 25 per cent of will be managed by NEA. Local people will be entitled to two to five per cent share out of NEA’s 25 per cent. The construction work will start from July 2014 and will be completed by December 2019.

Earlier, the project was designed as an export-oriented with 90 per cent of the power to be exported to India. Even as an underground outfit, the UCPN (Maoist) had been against the project stating that a project whose investment, profit, utilisation and ownership belongs to the foreigners can not be in the interest of nation.

Although the revived project has gained wide acceptance among the public and energy experts, the opposition are questioning the way it was awarded to the Chinese without bidding. Energy Minister Post Bahadur Bogati clarified that the project would have been delayed had the government gone

for bidding. Ironically, projects like Middle Marshyangdi and Chilime were delayed in the past because of Maoist obstruction.

Arjun Bahadur Karki, Joint Secretary of the Energy Ministry, says finding bidders who do not pose conditions is difficult. Kali Gandaki project is a case in point. “Besides, there are criteria to be set for calling for an international bidding, which we still don’t have.” he says. “There is no difference between taking something upfront or adjusting it in the PPA,” clarified Karki, explaining that free energy and free equity ultimately reflects on the PPA.

Nepal has bitter experience with foreign built projects on power purchase. NEA incurs loss from foreign invested Khimti (60MW) and Bhote Kosi (36MW) projects by signing the PPA in dollars. The PPA was signed in 1996 at 5.95 cents per unit. Nepali currency devalued from Rs 20 to a dollar to Rs 70 over a short period resulting in loss of over Rs 2 billion. The current loss of the NEA stands at Rs 30 billion.

In West Seti’s case, the government has agreed to sign the PPA only after the CTGC prepares the Detail Project Report (DPR). “It will be fixed in both currency to tackle the fluctuation in foreign exchange rate,” Karki says. But it is highly likely the NEA will have to take a loan to raise 25

per cent equity of the $ 1.2 billion (Rs 95 billion) project and GTGC has promised to help NEA get a loan from China Exim Bank, which will be in dollars. However, what has put off experts is the fact that the government has agreed to construct transmission lines of the project, a lost deal.

One of the ignored issue in the project is about utilization of water. The discharge rate of water from the reservoir is estimated at 90 cubic litre per second, which can irrigate 270,000 hector land. “We always forget multi-usage of water and focus only on electricity while planning hydropower project, which is unfortunate,” says Ratna Sansar Shrestha citing example of African country Lesotho which earns $25 million from South Africa with 18 cubic litre per second discharge of water.

The proposed project is located in Doti, Baitadi, Dadeldhura and Bajhang districts in Far West region, which is not only deprived of electricity but also irrigation. People work in the field only for four months and find a job in India during dry season. An irrigation project to channalise the water from reservoir into the dry fields could not only contribute to country’s bread basket, it could stop seasonal migration of people in these district to India.

To be sure, construction of a 195-m high dam will affect 18,000 people of 2,500 households. If the concerns of the displaced are not addressed, the project will have to face public wrath. “If local people get their share of benefits and the issue of compensation, relocation and rehabilitation is sorted, we will all support the project ” says Ratan Bhandari, who led the campaign against the project in the past. The villagers in these districts see the project as an opportunity to make their village electrified and industrialised.

The annual growth of Nepal’s power demand is 10 per cent or 100MW. NEA has five big projects (including Upper Tamakosi and Chilime) totalling 840 MW to be completed by 2017. If all the projects complete on time, total installed capacity by 2020 will be over 2,300MW, in which 850MW will be reservoir project. The government has so far issued construction license for generation for 1,600MW and survey licenses for over 15,000MW.

Dewan Rai