Twisted tale of hydro dreams

“Oye, aju Kati baje batti aaucha?”-This has been one of the most used sentence of Nepalese lingua Franca for the last few years especially during the winter season. On the books, we are one of the  richest country in the world in terms of hydro resources. Despite having such  abundance of hydro sources , less than 40 % of total population have access to electricity and those who do have electricity are reeling under (up to 14 hours per day) load schedule during winter.

During late 1960’s Dr Hari Man Shrestha created a buzz by declaring that Nepal possessed a theoretical hydropower potential of 83,000 MW and economic potential of 43,000 MW.Since then each and every Nepalese have dreamt of speedy harnessing of the water resources and the massive inflow of hydro dollars to the national economy. But 50 years has passed since the disclosure but nothing has been achieved (Sherchan, 2000).

This tortoise pace of development of hydropower in Nepal is in sharp contrast to the situation in the immediate neighboring countries. India has seen a rise in hydropower sector especially due to the strength of very progressive incentives which are being provided to hydro power investors by Indian government. Similarly another fellow SAARC country Bhutan with assistance from India is surging ahead in terms of hydropower development. Bhutan already exports 1500 MW of electricity to India plus it also has many new projects ready on the pipeline for implementation. As per regards hydropower development, Nepal has dismally failed in tapping this vast and ultra essential resource. What is prevailing hydro power development in Nepal? Some of the possible reasons can be:

·         Improper Planning

For a hydropower project to be fruitful there must be the availability of other supporting infrastructures as well i.e. access to the roads and transmission line for power evacuation etc. The technical and financial viability of the whole project depends on these subordinate infrastructures. But due to haphazard planning of policymakers, they fail to address all these issues which make the whole project implementation process an expensive affair. Thus, even a small hydropower project has to construct the access road and transmission line for power evacuation and bear the cost of heavy initial investment.

May be a basin policy can be the possible solution to this problem. Project infrastructure such as transportation routes, power transfer routes can be shared by all the projects (may/mayn’t be related to hydro power) within the basin. This is going to bring down the total cost and total time .

·         Fluctuating Policies

In order to promote foreign investment in hydropower sector, Government of Nepal promulgated Hydropower policy -1992 AD, Water Resources Act -1992 AD and Electricity Act 1993 AD. Those policies were very development inductive and had excellent provisions for bringing about hydropower development .Some of the major incentives were:

• 1.       License validity of 50 Years.
• 2.       Income Tax holiday for 15 Years.
• 3.       After 15 years-Income Tax at the rate of 10 %, this was far below prevailing income tax rate.
• 4.       Mere 1 % Custom duty on imported goods for the project.
• 5.       Government of Nepal’s land was made available to the hydropower projects on lease.

Some projects like Bhotekoshi – 36 MW and Khimti – 60 MW was able to cash in during that time but later in 2001 AD Government of Nepal decided to amend the existing policies. After the whole amendment process, many of the incentives were either reduced or cancelled. I.e. scrapping of Income tax holiday for the hydropower projects, License validity was reduced to 35 years, Hydropower projects had to pay 21.5 % income tax, same as that of corporate houses. Further more, Govcernment passed the bill to make VAT applicable to all the hydropower projects above 3 MW.This resulted in immediate rise in cost of all projects by 13 %.

Thus, due to such drastic fluctuation in policies as part of Nepalese Government, many foreign investors stopped investing in hydropower projects of Nepal. This also yielded a bad name for Nepal in the global hydropower market (Sherchan, 2000).

·         Security Concerns

Hydropower projects require comparatively bulky investment .But as Nepal was constantly being eroded by various political conflicts during course of last two decade or so, thus investors were really not willing to invest in hydropower sector due to security reasons. Those who were willing also had to pay large sum for project security. After paying money also there was no assurance of complete security (Dhungel, 2011).

But now slowly with peace prevailing in Nepal, the security concerns may be sidelined and investors may feel secure about their investment, plus with new government initiations like BIPPA and DTAA there is a chance of new revival in the hydropower investment.

·         Financial Hindrances

Due to absence of technical personnel capable of analyzing and monitoring hydropower related risks and advantages, banks of Nepal are really scared of investing in hydropower sector. As electricity is related to various aspect of human life thus hydropower investment must be made a priority sector by the Nepalese banks. A technical unit must be developed inside the country to assist financial firms to provide loans to hydropower investment.

·         Social Demands

Government of Nepal donates 1 % of the total royalty paid by a hydropower project for the development of the district where hydropower project is established. But still developers are often harassed by local resident for providing various infrastructures in the area i.e. schools and bridges etc.

The whole Maoist insurgency period in Nepal was really troublesome for the developers as they had to provide various financial and social aids to them just to keep project running (Sherchan, 2000).Thus Government must make sure that that royalty being paid by the projects are utilized properly for the benefits of people of the host area , there must be a proper mechanism to check the utilization and leakage of funds while reaching the host area after being dispatched from the government . Government must also order local administration to act as a mediator between the project people and the people from host area so that people will not come up with any illegitimate demands, time and time again.

·         Technical support to the producers

Hydropower generation requires a lot of expertise and technical knowledge of various fields. Small level private projects are left with no option but to hire expensive experts from foreign countries as there is very limited number of technically skilled person in Nepal. And those available are also already engaged in government projects. The opportunities for skill development are limited to government projects only. Thus, there must be a drastic change in this attitude. Personnel from private sectors must also be provided with equal opportunities to get skillfully equipped in assisting hydropower development.

It has been realized that development can be accelerated through proper management of water and other resources. It can be the basis of making the country we live in more prosperous. Rational utilization of water can trigger numerous opportunities for both skilled and unskilled labour.Hydropower development can be the best option for utilizing water resources and providing opportunity for the nation’s unemployed and disenchanted. Hydropower development can really take our small nation into new heights of economic prosperity. Hence, it is imperative to revise our existing hydropower policy for foreign as well as domestic capital mobilization. In the way of hydropower progress, politicians have often put unnecessary barriers time and again to fulfill their vested interests. As with all aspects of the countries, as long as the political system fails to transcend these interests, hydropower sector will always remain vulnerable and as usual their will be no light at the end of the tunnel.

References

Dhungel, D. K. (2011, 02 10). Beyond Upper Tamakoshi Political will,committment lacking. The Himalayan Times , p. 8.

Gurung, J. B. (2010, 09 13). Micro-hydel projects and Ghandruk. The Himalayan Times , p. 8.

Sherchan, B. M. (2001). Hydropower development in Nepal.