India will be taking over an ambitious hydropower project in Nepal — West Seti — nearly four years after China withdrew from it, ending a six-year engagement between 2012 and 2018.
India’s National Hydro Power Corporation (NHPC) has already begun preliminary engagement of the site in far-western Nepal following Indian Prime Minister Narendra Modi’s visit to Lumbini on May 16. in fact, the groundwork and informal discussion seem to have begun much earlier when Nepal Prime Minister Sher Bahadur Deuba visited India in April. During a local bodies election campaign in early May, Deuba had declared that since India was Nepal’s power market and it had a policy of not buying power from China-executed projects, West Seti would be given to India.
Four days prior to the Lumbini visit, the NHPC’s intent in writing had reached the headquarters of the Investment board headed by the Prime Minister. The board is likely to clear it soon and formally ask the NHPC to handle the project.
The CWE Investment Corporation, a subsidiary of China Three Gorges Corporation, had informed the Nepal Government in August 2018 that it would not be able to execute the 750-MW West Seti Hydropower Project it had undertaken on the ground that it was “financially unfeasible and its resettlement and rehabilitation costs were too high”. Prior to that, the Snowy Mountain Engineering Corporation (SMEC) had been refused renewal of its licence following its failure to begin the work “convincingly” during an entire decade from the mid-1990s. The Australian company had been given a generation licence for 30 years under a Build, Own, Operate and Transfer (BOOT) scheme.
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India -Nepal power relations…
Nepal is rich in power sources with around 6,000 rivers and an estimated potential for 83,000 MW. India has formally approached Nepal on many occasions, seeking preferential rights over Nepali waters should it match offers coming from elsewhere.
India is viewed as a feasible market for Nepal, but there has been some uncertainty in Nepal over India’s inability to deliver projects on time. India has undertaken to harness or expressed intent to harness major rivers in the north. An ambitious Mahakali treaty was signed back in 1996, to produce 6,480 MW, but India has still not been able to come out with the Detailed project Report. The Upper Karnali project, for which the multinational GMR signed the contract, has not made any headway for years. Also, one reason SMEC had to wind up was its failure to enter into a power purchase agreement with India.
What has helped build faith recently is India’s success in executing the 900-MW Arun Three project in eastern Nepal’s Sankhuwa Sabha, which is being executed by India’s Sutlej Vidhyut Nigam under a BOOT scheme, and whose foundation was laid in 2018 and which is set for completion by2023. During his first visit as PM to Nepal in 2014, Modi had said India must start executing its projects timely. The company executing Arun Three is also being awarded the 695-MW Arun Four project, followed by the decision to award West Seti to NHPC.
Estimated to cost Nepali Rs 104 billion (Indian Rs 6,500 crore), the project is envisaged to provide Nepal 31.9% electricity free. Besides, locals affected by the project are being given a share of Nepali Rs 10 million plus 30 units of electricity per month free.
Nepal’s Constitution has a provision under which any treaty or agreement with another country on natural resources will require Parliament’s ratification by at least a two-thirds majority. That will also mean homework will be required before any hydro project is signed and given for execution.
Nepal has a massive power shortfall as it generates only around 900 MW against an installed capacity of nearly 2,000 MW. Although it is currently selling 364 MW power to India, it has over the years importing from India.
However, Dipak Gyawali, a former Energy Minister, sounded a note of caution: “Until India agrees to value Nepal’s water and the existing focus on power is not reviewed, mutual distrust will continue to eclipse the potential for progress of both sides in the long term. Once the projects are made multi-purpose — with flood control, navigation, fisheries, irrigation contributing to agricultural growth etc, giving due value to water — the cost of power will be much lower compared to existing rates, and people on both sides will have multiple benefits.”
… and diplomatic ties
After a standoff between Nepal and India led to the economic blockade of 2015, equations changed after Deuba took over last July, replacing Oli. Modi, whose popularity in Nepal had appeared to be waning, developed friendly and political relations with Deuba. Modi’s BJP and Deuba’s Nepali Congress decided to establish “fraternal ties” during Deuba’s visit to Delhi last month.
On Raksha Bandhan last year, the Nepal Prime Minister’s wife, Arzu Deuba, tied a rakhi on Vijay Chauthaiwale, in-charge of the BJP’s foreign affairs cell. The West Seti Project covers the far western Nepal region, where Deuba hails from. Completion of the project will be a gift to his electorate and the region at this advanced stage in the career of Deuba, who is now 79.
It is still not clear what changes or expansion the NHPC will propose to the project initially planned at 750 MW, but the project will be a storage scheme generating power round the year to be supplied to India, either for domestic consumption or for the trade through its national grid.
And its success is expected to restore India’s image in Nepal and give it weightage in future considerations for hydropower projects, when competition is bound to be tough. West Seti, therefore, has the potential to be a defining model for Nepal India’s power relations in future.