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Upper Karnali Project imbroglio speaking truth to power in “loktantrik” Nepal

By Bihari Krishna Shrestha
Lately, the Upper Karnali Hydel Project is once again in the news after a delegation composed of local people, senior politicians, and hydropower experts (including this author) submitted a memorandum to PM Sher Bahadur Deuba before his scheduled visit to India. While the memo demands for the scrapping of the project agreement with the Indian company, GMR, this is not the first time that such a representation has been made to the power that to be on the issue. The first time the problems with the proposed project was aired was in the form of an “Open Letter” addressed to the then PM Sushil Koirala and the India’s PM Modi on the eve of the latter’s visit to Nepal in November 2014. The second time such representation was made was to the then PM Prachanda in August 2016 on the eve of his visit to India.
The project agreement itself was signed a full decade ago between the Government of Nepal and the Indian company, GMR, in 2008 that has since been dragging on, although not because of the sustained local protests and representations to the powers that be, but mainly due to GMR’s continued inability to line up necessary finances even as Nepal’s Investment Board continued to extending the deadlines for financial closure in favour of the company.
The case against the project in its present form is simple and straightforward. Firstly, the project, when awarded to the GMR, was designed only for 300 MW which was later augmented, under controversial circumstance, to 900 MW that would require the impounding of the water for 18 to 21 hours a day and release it during the next 3 to 6 hours to generate power at the new capacity. However, its consequence would be deadly for the people downstream. It would wipe out several major irrigation infrastructures downstream such as Rani and Zamaria in Bardia and Kallali districts that have been traditionally built, owned and managed by the people themselves and have the combined capacity to irrigate 75,000 ha of agricultural land which would rendered useless due to the daily flooding. Even more vital is the issue that the construction of the 900 MW project would ruin the Upper Karnali site which, as per a World Bank study, has the potential to generate 4,180 MW at one of the lowest cost due to its highly advantageous topography. It would be a multipurpose reservoir-based project that would contribute to flood control and make available vast quantities of regulated water. Given these extraordinary advantages, the site itself is known among the national and international hydro experts as “the jewel in the crown” and the second most advantageous worldwide. While vast proportion of Nepal’s population remains deprived of access to electricity that, according to latest Economic Survey, accounts for only about 4 percent in the composition of energy sources used by the people, lately, the GMR had also broached the possibility that the power would after all be sold to third country, Bangladesh. Clearly, GMR’s interest in doing the project is to make a profit even as India remains uninterested in the use of the power in India.
One reason that is believed to be at the centre of GMR’s failure to line up financing is that the project cost is extravagantly inflated at 139 billion rupees–double of what experts believe should have been the reasonable cost– to which Rs. 25 billion have lately been added, thus bringing the cumulative cost to a whopping Rs. 164 billion.
The mystery and controversy surrounding the project and the deal has remained heightened by the fact that its Project Development Agreement (PDA) was kept secret from the public as well as Parliament and the Supreme Court by the Investment Board under the alibi that it was a “commercial agreement” until its hand was forced to make it public by the National Information Commission in response to a plea by an activist. Once out in the open, the PDA only confirmed the worst fears regarding the project which was conveyed through Open Letter 2 to the then PM Dahal and India’s PM Narendra Modi on the eve of the former’s visit to India. The Letter maintained that the PDA did not “serve the interests of either the government or of the peoples of both Nepal and India, but only that of an (unduly) profit making body.”
By any stretch of imagination, the UKP in its present form should never have been taken up in the first place. But the fact remains that GMR was able to bag the project with considerable ease and Nepal’s Investment Board has continued to grant extensions on the deadlines for financial foreclosure even as the Indian company’s capacity and intent seemed increasingly questionable.
While the issue has been brought to the notice of Nepal’s and India’s PMs on more than one occasion, GMR and the PDA clearly do not seem to have come under any threat, suggesting that the company has cultivated constituencies of trust and confidence at important quarters in the power structures of both Nepal and India. At one point, a Nepal PM, scheduled to meet his Indian counterpart shortly, upon being briefed about the possible negative repercussions of Indian involvement in some major projects in Nepal was known to have cried out in exasperation that he clearly did not have anything to offer to India.
As persistent as the stakeholders have been for saving one of the most precious gifts of Nature, the UKP hydropower site, PM Sher Bahadur Deuba’s rather tentative assurance that the PDA could be reviewed has been the best ever yet. This experience once again brings to light the ironies of Nepal’s more than half a century long democracy: it is very difficult to speak and sell truth to power.

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