India-tech Foundation, in
association with Ministry of Water Resources, Government of Nepal, Federation of
Nepalese Chamber of Commerce and Industry and Independent Power Producers'
Association of Nepal, organised an International Conference on Hydro Power in
Nepal, at Kathmandu on April 25 - 26, 2009. The programme was well attended
with large participation from India, Nepal and a few other countries. It was
inaugurated by the Minister of Water Resources, Government of Nepal.
Hydroelectric potential in Nepal
is so large that it can meet the total requirement of electricity of Nepal and
at the same time it could transform the economy of the country. I had the
opportunity to speak in the Inaugural Session as also the privilege of chairing
two other Sessions which consisted of panel discussions on Open Access,
Financial Regulation and Grid Synchronisation and another Session on Social
Responsibility and Environmental Management. During the Inaugural Session, I
made a few remarks which are briefly described below:
Inspite of water
being a renewable source of energy, it has been a global failure that not more
than 20% of the hydroelectric potential has been harnessed. In India, with over
35,000 MW of hydroelectric projects we are at par with the global average in so
far as the extent of exploitation of hydroelectric potential is concerned which,
is estimated to be of the order of 150,000 MW. In Nepal, this proportion is not
Whatever may have
been the thinking about hydroelectric projects in the past, atleast in last two
years the attention to hydro power has intensified in the wake of serious
concerns about the consequences of global warming and climate change,
particularly after the Report of the IPCC came out. At this point of time a
more favourable support is emerging for developing hydroelectric projects in
preference to fossil fuel based new capacities.
A few years back,
there were serious reservations on recognising large storage based hydro
projects in the category of renewable energy. Even now, reservations in many
corners continues but there are large number of countries which have started
thinking favourably for storage hydroelectric projects. It is expected that
there could be global consensus on storage hydro projects.
One of the main
reasons for objection to, and protest against, such large hydro projects has
been the issue of rehabilitation and resettlement of affected towns, villages
and families. While it is true that in many cases, problems arising out of
setting up of large storage hydro projects have been magnified
disproportionately by political dispensation and by NGO's, it is also equally
true that in a large number of these projects the project developers have been
less serious than they needed to be to address the hardships caused on account
of submergence and reservoirs. This issue has to be considered with a human
face. Towns, villages and families which have existed for generations in these
locations get dislocated. Obviously, it creates economic problems, but more
importantly it creates social, psychological and emotional problems. A proper
advocacy on rationale of hydroelectric projects would, therefore, require
formulation of approach, Policy and Schemes of rehabilitation and resettlement
as an integrated solution to all these issues. In many cases, hydro projects
dislocate and disrupt a number of infrastructural facilities. They need to be
recreated, so that the inconvenience caused is eliminated. As a matter of fact,
if our approach and development of alternate townships and facilities leads to
creation of an impression among the concerned people that if a hydro project is
located, they have better houses, better facilities and more comfortable living
and earning, it would lead to creation of demands in various areas from the
people that such projects should be located in their areas. Today, they are
protesting against; our policy and action should create demands from those very
people that projects should be located in their area. We have to evaluate to
what extent our project developers come out in this test.
In the energy
development strategy of India, hydro power occupies very important position. In
the year 2003, India launched "50,000 MW Hydroelectric Initiative", which
involves development of over 160 power projects in different parts of the
country. They are being taken up on priority. We have a potential of 150,000
MW, the remaining ones will also be taken up later.
development strategy for hill States of Himachal Pradesh, Uttarakhand, Jammu and
Kashmir and North-Eastern States, particularly Arunachal Pradesh, involves their
overall upliftment through harnessing of their hydro potentials. These States
in the medium to long term will benefit immensely when projects identified in
these States are developed, not only from the additional electricity supply that
they get but also from the revenue that is generated. The economy of our
neighbouring country Bhutan has been transformed mainly on account of the
hydroelectric projects like Chukkha and recently Tala Project. Electricity
contributes almost 65% of their overall national income, and the per capita
income of Bhutan is higher than even India.
It is estimated
that Nepal has a potential of 83,000 MW. But there are experts who also believe
that if proper assessments are made, these potentials could be as high as about
200,000 MW. Even if we consider the conservative estimate of 80,000 MW, the
harnessed capacity is less than 700 MW which is not even 1% of the potential.
It is important for the economy of Nepal that a number of power projects are
developed in the shortest possible time, so that the whole country benefits. An
important point to note is that the energy contained in water, if allowed to
flow into the sea, without extracting electricity out of it, is lost forever.
This is quite unlike fossil fuels in which case even if it is not consumed, it
can be consumed later. Time is, therefore, of essence.
The Government of
Nepal came out with a Policy on developing hydro projects. It has a two stage
license. The first stage licence is given to the developer for carrying out
investigations and preparing Feasibility and Detailed Project Reports. Though
it is often stated by the authorities that once the Project Reports are prepared
properly after due investigations, the second stage licence will be granted, but
any uncertainty in this regard needs to be set at rest. The procedure itself
should spell out clearly that the second stage licence would be more or less
The experience of
last few years indicates that the pace of preconstruction development activity
is very slow. The Government may consider institutionalising a formal mechanism
which will monitor and provide necessary inputs and assistance to the
developers, so that the project development is speeded up. This mechanism could
take care of problems which arise in the process of land acquisition, various
statutory permissions and sanctions, security aspects and most importantly the
connectivity (road transportation etc.). The problems concerning security of
people, so that investigations and subsequently project construction activities
are allowed to proceed smoothly, and the difficult locations of project sites
without proper transportation connectivity, are such that these could be
addressed effectively only by the Government. Individual developers will not be
able to handle them. If they are not attended to, the process can go on slowly
is the need for commensurate transmission systems to be developed - both intra
Nepal transmission and sub-transmission systems and transmission line
connectivity with India. Transmission planning required to evacuate power from
various generation projects, particularly from such projects which are being
developed on merchant basis, is a challenging task even in India. Unless
destinations of power flow are known in advance, proper transmission planning
does become difficult. While the transmission and sub-transmission systems
within Nepal will inevitably have to be developed by Authorities in Nepal, the
transmission lines to India, at various points of drawal of power, will need to
be co-ordinated between the power project developers and transmission project
developers, so as to avoid any mismatch on either side.
In order that
these generation and transmission projects achieve financial closures, it would
be necessary that a number of regulatory issues both on Nepal side and on India
side are addressed in advance. To the extent power would be required to be
purchased within Nepal for consumption, the policy and procedure for fixing
tariff will need to be formulated and notified, so as to bring about complete
clarity on the subject. Similarly, power to be purchased by various agencies in
India will need to be brought under the regulatory policies, so that any
ambiguity on this account is eliminated.
The Minister of Water Resources,
Government of Nepal, Mr. Bishnu Prasad Paudal, who inaugurated the Conference,
made a number of important observations, which are outlined below :
Hydro power, the Government
believes, will form the most important foundation for development of Nepal.
Nepal's economy in coming years will depend, to a great extent, on these
Hydro power is on the Agenda
of all the political parties. They are all convinced that developing these
projects would be in the direct interest of the people of Nepal. All the
parties are also unanimous that private sector participation in developing
these projects will be essential. These are projects which require large
amounts of investments and it may not be possible for the Government to
mobilise such large financial resources. Dependence on private investments
is, therefore, inevitable.
Though the potential for
hydro projects in Nepal is more than 80,000 MW, the Government has made a
modest target for developing 10,000 MW by 2020. They will be executed with
a three pronged approach consisting of private developers, public sector
undertakings and joint sector. Foreign investments obviously will be
required in a significant way.
In order to bring about
greater degree of clarity on the power sector development approach,
Government is contemplating an Act on Electricity and another Act on
Electricity Regulatory Commission. The Bills for both these Acts have
already been prepared and it is expected that the Laws will be passed soon.
With the establishment of
Electricity Regulatory Commission, an environment of competition would be
facilitated in which both private sector and public sector will contribute.
Indian agencies can play an
important role in developing these projects. India and Nepal have age old
cultural links and the Government of Nepal has strong commitments to
implement the multi purpose projects viz. Pancheshwar (6,000 MW), Karnali
(10,800 MW), Saptakoshi (3,500 MW).
The Government is aware of
the need to provide security to the people of project developing agencies.
We recognise that unless the right environment for safe working is created
and maintained, project development activities will suffer. The Government
is committed to ensure security.
Subsequently, in the two
Sessions - "Panel Discussions" and "Social Responsibility", which I had the
opportunity to chair, a number of issues came up. These are outlined below:
The Government may
consider setting up of an Inter Institutional Group (IIG), which should consist
of senior representatives from Ministry of Water Resources, Banks, Environment
Ministry, and Developers. This should regularly meet till the financial closure
of the project, so that all issues standing in the way of financial closure are
development of hydroelectric projects needs complete involvement of Central
Electricity Authority, Central Water Commission and Central Transmission Utility
(Power Grid). They provide the technical guidance on the type of project, the
broad design of the project and also the required transmissions systems. A
similar set of institutional arrangement would be necessary in Nepal. In the
interim period, necessary assistance may be sought from these agencies which
have been involved in development of more than 35,000 MW projects in India,
besides about 20,000 MW under execution.
There would also
be a need for Bilateral Agreements between India and Nepal which will facilitate
transmission of power. This Agreement could take care of the jurisdiction of
various agencies on India side as well as on Nepal side, so that any ambiguity
and gaps could be properly addressed.
The sale of power
between project developers from Nepal to electricity distribution agencies in
Nepal and to various agencies in India will also need to be structurally worked
out. Whether all the sale would be channelized through one or more trading
agencies or there would be direct Agreements with the distribution utilities or
it would be a combination of both, will need to be formalised.
When the Grid with
India is connected, there will be a need for evolving common Operating
Standards. The Transmission agency in Nepal, Power Grid (India) and Central
Electricity Authority (India), may sit together and evolve such operating
For all such
projects, which have been licensed and those which are in the pipeline, the
Government of Nepal may identify the road connectivity need and formulate
projects, so that these could be completed in time to meet the needs of these
acquisition, the macro level thinking in the Government needs to get down to
local level officials, so that land acquisition process is made developer
friendly and possession of land gets expedited.
While the lending
could be streamlined with the consortium of Banks of Nepal and India, the issue
of equity funding may have to be addressed. The Listing Law in India requires
that the Nepalese Company should be Listed in the Nepal Stock Exchange first.
In order to help project developers, the present provisions relating to Listing
in Nepal need to be liberalised. Project companies should be enabled to raise
equity funds even during the initial years of project development.
Resettlement Policy should be clearly laid down. While formulating and
reviewing the Policy, the developers should be fully involved, so as to take
care of their practical difficulty. These Policies will need to be disseminated
right upto the local level Government agencies, as also the affected people, so
that any disconnect is avoided.
Both India and Nepal have common
interest in harnessing hydroelectric potential of Nepal. There seems to be
considerable weight in the argument that potentials, if properly assessed, could
be as high as 200,000 MW. The geography of Nepal is such that these projects
when developed would not only benefit immensely the people of Nepal, who need
enormous amount of electricity so badly, but also to Indian States which share
common borders on a long stretch. Transmission connectivity from Nepal to India
could be a much easier and workable exercise as compared to planning and
implementing connectivity between North-Eastern States of India and other
regions. It must, however, be made clear that development of hydro potential in
Nepal has first to be done to meet the needs of Nepal. Only balance power would
be available to India. Once this approach is followed, the people of Nepal
would identify their interests with the development of these projects. Large
scale support of people of Nepal is essential for smooth development of these
projects. And, such supports will be available only when they see their
benefits and benefits to Nepal in these projects.