In the middle of
September, 2007, a very important seminar was organized in Kathmandu by Nepal
Bankers' Association, Independent Power Producers Association, Nepal and PTC
India Ltd. Infact, this event "Power Summit - 2007" was the second in this
series, the first one having been organized in 2006. The main objective of this
seminar was to identify the investment opportunities and to generate interest in
Nepal's Hydropower development, specifically in the large scale hydropower
generation and export. I had the opportunity of participating as also of
chairing a session which dealt with the issues of Transmission, Interconnection
and Power Trade.
given to this event by the Govt. of Nepal can be judged and appreciated by the
fact that this was addressed in the first plenary session by the Minister for
Finance, Former Deputy Prime Minister, Minister for Physical Planning & Works
and Minister for Water Resources, apart from other senior officials and
dignitaries in the Govt. of Nepal and a number of associate Govt. Agencies.
Participation in this was equally impressive from Indian public sector and
private sector companies.
Nepal has recently
notified a hydropower policy which aims at inviting foreign investments in
development of hydroelectric projects. Though, geographically much smaller in
size as compared to India which has a hydro potential of 1,50,000 MW, the
potential in Nepal is as high as 83,000 MW. As a matter of fact, one of the
power experts in his presentation gave an estimate of almost 7,00,000 MW if all
the resources and all the river systems are properly assessed. In any case, if
we go by the earlier estimate of only 83,000 MW, these natural resources hold
enormous promise for both India and Nepal in respect of their economic
development and overall upliftment of living standard of our peoples. In India
we have reached a per capita electricity consumption level which is of the order
of 620 KWH per year and it is considered very low and totally inadequate.
Within India there are a few states whose per capita consumption is less than
even 100 KWH and these states are obviously very poor and are unable to provide
an acceptable level of energy consumption to the people. Almost similar to
these states - infact somewhat lower - is the per capita electricity consumption
in Nepal. As compared to the huge potential that Nepal possesses as mentioned
above, the development has been hardly of the order of about 600 MW. Almost 80%
of Nepalese population is yet to be provided a reasonable access to
electricity. We can draw a parallel with our own North Eastern states which
have huge hydroelectric potential and their own level of consumption of energy
and electricity is so unevenly and poorly placed. In a way, both, North Indian
States of India as well as Nepal present a paradoxical picture inasmuch as both
of them sit on the huge natural endowments of water energy, but yet they are
profusely deprived of access to these energy and electricity resources in terms
hydro potential is not to be seen only in the context of generating power and
consuming power. These potentials have the strength and the power to provide
and propel overall economic activities and growth. Availability of electricity
is one advantage and a very apparent advantage. The bigger advantage is overall
development. The example is not far to search. Bhutan understood the power of
its hydroelectric resources, started launching right initiatives at right time
and the result has been that not only the Bhutanese have electricity but also
almost 70% of their GDP comes out of hydroelectric generation. It has
transformed the economy of Bhutan and the process is continuing.
though belated, seems to be taking shape in the governance system in Nepal.
Almost all the Ministers, Senior Officials and those from industry, who
participated and spoke in this seminar, emphasized the need for facilitating the
process of speedy development of hydroelectric projects. There was none who had
a contrarian view. Yet, it would be relevant to quote some of the important
observations to precisely project the nature of conviction and belief that has
emerged and the urge with which the Nepalese governance, as also the informed
groups, system want to promote hydroelectric development.
The former Deputy
Prime Minister and Finance Minister who is an eminent personality in the
Communist Party United Marxist Leninist (UML) was not only forthright in his
speech but his articulation emphasizing the urgent need for speeding up this
process is worth noting and appreciating. Some of his observations are quoted
Nepal is rich in water resources. There are over 6000 rivers and rivulets that
flow to India through five major river basins. The available water resource of
the country can generate more than 83,000 MW of power. But the country has been
able to generate only 612 MW.
Due to shortage of power existing industries are unable to run in full and new
industries are not coming up. It has hampered the economic development of the
Party has a clear vision for the development of hydropower projects. This
vision is outlined as below:
We want small projects to be
developed by Nepali developers utilizing Nepali capital.
We want Village Development
Committees and District Development Committees to develop small projects
so that villagers get energy and local governments get revenue.
Joint Venture between government and
private sector to develop medium size power projects.
Large power projects to be developed
through foreign investments.
With the above four types of
approaches we should target to develop atleast 20,000 MW
in next ten years.
A number of Indian developers have shown
their interest in Nepal for developing almost 12000 MW of capacity. India
needs power and Indian developers have chosen Nepal because there is a big
advantage of having a secured market in India. With this positive
environment there is every possibility that Indian investors can
successfully build and operate hydropower plants in Nepal.
A few months back, a delegation of UML had met the Prime Minister of India and had
requested for speeding up the work on Pancheshwar Project. Faster development
of this project could be to the mutual benefit of both India and Nepal.
We are in favour of Saptakosi Dam Project. We want Sunkosi - Kamal Diversion
Project to be implemented simultaneously. Nepal and India shall get benefit of
irrigation, electricity and flood control.
observations not only outline the nature of changes that have taken place in the
mind set of people toward particularly large hydro projects but they also convey
a deep rooted conviction and commitment of a very important political outfit of
government agencies engaged in power development a well as the private sector
have now to respond, in a serious and meaningful manner, to avail of the
opportunities that have unfolded. The private power policy of Nepal was also
discussed. By and large they have been structured on the same framework which
is being used in hydro rich states of India - relying upon the extent of free
power, upfront payment of premium etc. However, a small lacuna that was
highlighted during discussions relates to two stage license for development of
hydro projects - the first for detailed investigations and preparation of
Detailed Project Report (DPR) and the second stage when the license would be
given for developing the project. It was argued that preparation of DPR for
hydro projects is distinctly different as compared to the Thermal Projects. It
requires much more time and money to do so. Therefore, the second stage license
should normally be an automatic process. Though it was clarified during the
seminar by an official of the Nepal Government Power Department that the
understanding is that those given first stage license, subject to satisfactory
preparation of DPR etc., would also be granted the second license, yet for
bringing about the required degree of certainty in the process this ambiguity
needs to be remedied. This will create even more interests and better quality
of investors and developers.
In the inaugural
speech of the Finance Minister of Nepal the observations made by the former
Deputy Prime Minister, as already briefly described were further reinforced. A
few quotes from his extempore speech are worth mentioning:
Nepal's Hydroelectric potential is not just for domestic consumption.
Infact Hydroelectric resources of Nepal, if properly developed, will create
enormous export potential. Nepal has a huge balance of payment deficit (one
billion US$). Hydroelectric projects will go a long way in addressing this
Besides export, Nepal itself has a significant gap between demand and supply.
Demand itself has to grow at a rate of 9 to 10%.
Large hydro projects should be preferred. Unless we facilitate development of
reservoirs to store water and develop such large projects, we will be wasting a
lot of energy in the water which will go away without being used. In this
context the Finance Minister quoted the statement of a senior political
personality of Sri Lanka who had said about the water "Let not a single drop of
water go to the ocean without quenching human thirst". The Finance Minister
related his own remarks to this and said in the context of Nepalese water
resources that "Not a single drop of water be allowed to go to the sea without
This shows the
awakening that has been created and is getting deep rooted in the belief and
approach of Nepalese government and administrative dispensation. We, in India,
need to work on this. As a matter of fact, in India we need to bring about
similar realization and recognition of the need for large dams in order that no
water is wasted unless it is properly channelized for drinking, irrigation
and/or electricity generation. Both Indian public sector and private sector
need to respond, in a significant way, to the Nepalese government policy as well
as to these positive approaches which have developed.
What is now needed
is to prepare adequately for investigations of such project sites which have not
been investigated so far. Wherever DPR's were prepared earlier and if they need
to be updated with fresh data with or without field investigations in a time
bound manner, the same should be done so that further progress on project
development takes place. Considering the large number of projects, it would be
necessary for Indian consulting agencies and others to set-up necessary outfits,
collaborate with the existing engineering agencies in Nepal and take up
investigations on new project sites.
conference, in one of the presentations a concern was raised whether large
number of projects with large capacities, if implemented, would lead to excess
power availability and the generating companies may find it difficult to sell
power. This issue was discussed in detail and it was pointed out that firstly
in Nepal itself there is going to be huge demand, and secondly Indian power
sector needs are enormous - 800 GW in next 25 years as compared to 135 GW as at
present. Therefore this concern appears to be somewhat misplaced. It was also
emphasized that in the long run hydro power would work out much cheaper because
of the absence of the need for fossil fuels whose prices keep increasing. This
gives a great competitive advantage.
In the context of
power project development in Nepal, interconnecting transmission system between
India and Nepal is perhaps the most important issue to be addressed
appropriately. This was the main topic in a session that I had the opportunity
of chairing and it would require a comprehensive analysis separately. It is,
however, necessary to highlight in this paper that since India and Nepal have a
long common border from west to east and there are a number of adjoining Indian
states which have large deficits of power, pending a long term arrangement of
Ultra High Voltage Transmission System, other modes of interconnections at a few
suitable locations interconnecting important load centers on Indian side and on
Nepalese side could be considered.
A connected issue
with reference to the transmission interconnections is the need for augmenting
transmission, sub-transmission and distribution infrastructure in Nepal itself.
Unless that is taken up on priority, the electricity consumption in Nepal would
not grow and also access to those who have not been provided electricity would
not be possible.
Role of Power
Trading would be the key to the commercial arrangements which needs to be
established between the generating companies in Nepal and those who have to
procure power via the power trading agencies. Power trading companies
themselves will need to upgrade their financial strength and standing so that
they could become buyers and then sell power to those agencies which are engaged
in distribution. Obviously, these commercial transactions will have to be
structured under the overall framework of the policies in Nepal and those in